More than 50 million retired workers received a Social Security benefit in April 2024. Those monthly disbursements are often their largest source of income. Indeed, a recent survey from Gallup found that 88% of retirees depend on Social Security to some degree, and 60% said benefits were a “major source” of income.
The Social Security program undergoes certain changes annually to keep benefits aligned with inflation and general wage level. Given the important role benefits play in retirement, it is imperative that beneficiaries (and soon-to-be beneficiaries) stay informed. But a recent survey from Nationwide Retirement Institute shows that many Americans misunderstand basic aspects of the program.
Here are three Social Security changes coming in 2025 that may surprise many Americans.
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1. Social Security benefits will get a cost-of-living adjustment (COLA) in 2025
Nationwide Retirement Institute recently reported that 70% of surveyed adults incorrectly agreed with this statement: “Social Security is not protected against inflation.” That statement is false. Social Security payments get an annual cost-of-living adjustment (COLA) to protect the purchasing power of benefits.
The COLA applied to benefits in any given year is based on how a subset of the Consumer Price Index (CPI) changes in the third quarter of the previous year, meaning the three-month period between July and September. To that end, the Social Security Administration cannot determine the official 2025 COLA until CPI data from September is published in mid-October.
However, based on current consumer pricing trends, The Senior Citizen League estimates that benefits will increase 2.7% in 2025. But the nonprofit senior advocacy group has already revised its forecast higher several times due to hotter-than-expected inflation in recent months, meaning the official 2025 COLA could be higher.
However, assuming Social Security benefits do indeed get a 2.7% COLA next year, the average monthly benefit for retired workers would increase by about $51, bringing the total to $1,967.
2. Some workers will have more Social Security taxes withheld from their paychecks in 2025
According to Nationwide, 74% of surveyed adults incorrectly agreed with the following statement: “Workers pay Social Security taxes on all of their income.” That statement if false. Current law caps the income subject to Social Security payroll tax. The maximum taxable earnings limit is $168,600 in 2024, meaning any income above that amount is not subject to taxation by the Social Security program.
The maximum taxable earnings limit is adjusted annually based on changes in the national average wage index. The official limit for 2025 will be published in mid-October, but the Social Security Board of Trustees estimates that the taxable maximum will be $174,900 next year. In that scenario, workers will pay up to $391 more in Social Security taxes in 2025.
To elaborate, the tax rate is generally 6.2%, meaning a worker with income exceeding $174,900 will have $10,844 withheld from their paychecks next year. But that same worker will have $10,453 withheld from their paychecks this year. The difference is $391.
3. Some Social Security recipients will have benefits withheld in 2025
According to Nationwide, 46% of surveyed adults incorrectly disagreed with the following statement: “Some of your benefits may be withheld if you’re still working before your full retirement age.” That statement is true.
Workers that receive Social Security may indeed have some of their benefit temporarily withheld if they are (1) under full retirement age and (2) their earnings exceed thresholds known as the retirement earnings test exempt amounts. There is a lower limit that applies to beneficiaries below full retirement age for the full year, and an upper limit that applies to beneficiaries that will reach full retirement age during the year.
Currently, the lower limit is $22,320 and the upper limit is $59,520. That means beneficiaries under full retirement age in 2024 will have $1 in benefits withheld for every $2 in earnings that exceed the lower limit. Similarly, beneficiaries that will attain full retirement age in 2024 will have $1 in benefits withheld for every $3 in earnings that exceed the upper limit.
The official retirement earnings test exempt amounts for 2025 will be calculated based on changes in the national average wage index and published in mid-October. However, the Social Security Board of Trustees estimates that the lower limit will be $23,280 and the upper limit will be $61,800. Put differently, benefciaries under full retirement age will be able to earn more income before benefits are withheld next year.
Importantly, the retirement earnings test amounts no longer matter once a Social Security beneficiary reaches full retirement age. Additionally, any benefits withheld before full retirement age are gradually repaid, such that retired workers typically recoup most or all of the money over a normal lifespan.
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Unfortunately, the CPI is usually grossly inaccurate for the inflation put on elders on SS. During the outbreak of the plandemic, the cost of living for seniors often doubled or tripled, and still is at that amount today. They have never gained ground or regained their losses of their SS. However, people are finally waking up to the inept administration, and realize it is them that cause our horrific inflation.
re #3 If you are working before full retirement age and do not exceed the lower limit, nothing is withheld.
Yes, but if you do still work from age 62 to 65 than you are paying twice for the earnings you paid for before age 62. And than you pay for the earning at a 50% tax rate on the money you earn while retired from age 62 to age 65.
Cost of living increase is a joke. Inflation is much higher than what the current regime is stating. Food and gas have increased by more about a third of what it was three years ago. People on fixed incomes can barley make it from one month to the next on Social Security alone. We already paid taxes on income all of our lives and we shouldn’t be paying any taxes on Social Security now.
Agree 💯%.
Same BIG changes happen every year unless there is no COLA. A change I would like to see is everyone should receive the same amount not a percentage of what they already get. My SS is above average so I get a higher increase than people with below average SS. I might get a $100 increase while someone with a below average SS gets $50. Make the amount $75 for everyone.
At a cost-of-living adjustment we end up with less. Insurance increases higher, med premiums higher, pharmacy meds higher. Lose medicare benefits. Medicare needs to be turned over to someone that knows what they’re doing.
Medicare, Medicaid, ACA, Vet’s Care, all insurance program costs are based on “standard of care” and the standards are based on what type of problem you have and where it fits in the International Classification of Diseases (ICD V 11) put out by the World Health Organization.
Then we need to disavow ourselves from the World Health Organization. They are apart of the global Cabal know as the One world Government
COLA adjustments should be based on a zipcode CPI.
I live in one of the most expensive zip codes in America, but having moved there 50 years ago, when it was derelict and long before gentrification, I now live at the poverty line. To base COLA adjustments on zip codes would be unfair. I’d have to leave the city.
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What a joke the COLA is ! For me, after the miniscule 2+ increase , the medicare is raised (and more benefits taken away or increase in price), so that my net gain each so called raise, is somewhere between $2 to $11 per month. WHOOPEE
Now you can take that trip to Hawaii.
I was (Motley) Fooled once years ago and it won’t happen again.
The first statement needs one more word to be completely true – “Social Security is not protected against ACTUAL inflation.”
Got to love the hidden messages in your face! Who is Motely Fool? The king’s clown! and regime has kept 99% of the population enslaved leading the sheep to believe collecting taxes was legal. These thieves know how to word their bs so the average Joe reads “only $1 is taken from the LOWER end. BUT THAT EQUALS 50% of your earnings are going into their pockets. On the UPPER end these thieves are taking $1 out of $3 which is equivalent to 30% of your earnings! This doesn’t include all the bs taxes collected for all other purchase’s!” If you do the math you are only getting .30¢ for every $1 you work for. Meaning if you’re only grossing $22,000 annually in reality you are only netting $6,600. Stand up and say “NO to the oligarchs!”