According to The Sun, Starting next year, Social Security recipients can expect to see three significant changes that will affect their benefits. The Social Security Administration (SSA) provides essential financial support to millions of Americans, including retirees, individuals with disabilities, and survivors of deceased workers. Currently, over 72.5 million people rely on these programs for financial assistance.
As the SSA prepares for these changes, those planning to claim benefits should stay informed about how these adjustments will impact their payments, taxes, and more.
1. Cost of Living Adjustment (COLA) Increase
On October 10, the SSA announced a 2.5% increase in payments for recipients due to the Cost of Living Adjustment (COLA). Although this increase is smaller than in recent years, it aligns closely with the 20-year historical average of 2.6%.
- Monthly Payment Increase: The average monthly Social Security payment will rise by $48, bringing the total to $1,968.
- Maximum Benefits: For workers retiring at full retirement age, the maximum Social Security benefit will increase to $4,018, up from $3,822. This maximum applies to those retiring at full retirement age (67 for anyone born after 1960).
- Widow and Disability Benefits: Benefits for widows, widowers, and disabled individuals will also see increases. The average benefit for a widow with two children will rise to $3,761, while individual widows and widowers can expect their benefits to increase to $1,832. A disabled worker with a spouse and children will see their benefit rise to $2,826. Note that these figures are expected averages and may vary based on individual circumstances.
All claimants can expect to see these increases reflected in their January payments.
2. Increase in Taxable Earnings Limit
For working individuals, there is a cap on the amount of earnings subject to Social Security taxes, known as maximum taxable earnings. This limit changes annually based on increases in average wages across the United States.
- Starting in 2025, the maximum taxable earnings will increase to $176,100, up from $168,600 in the previous year. This change means that more of a worker’s income will be subject to Social Security taxes.
Also read: 4 Ways to Expedite Your SSI Payments Through Social Security
3. Adjustments to Earnings Test Exempt Amounts
The Social Security Retirement Earnings Test (RET) is designed to reduce monthly benefits for beneficiaries who are below full retirement age and earn above a specified threshold. The RET reduces benefits based on the amount earned over this threshold, which varies depending on whether the beneficiary will reach full retirement age during the year.
- Once beneficiaries reach full retirement age, their benefits will be recalculated to reflect any benefits that were withheld while they were working. Consequently, their monthly benefit will be permanently increased to account for these withheld benefits.
As with taxable earnings, exempt amounts typically increase annually in line with the national average wage index.
Conclusion
These upcoming changes in Social Security policies will have a direct impact on millions of Americans relying on these benefits. Recipients should stay informed and prepare accordingly as these adjustments come into effect in 2025.
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