Ch-ch-ch-ch-changes
Turn and face the strange
Ch-ch-changes
Don’t want to be a richer man
— David Bowie

While David Bowie may not aspire to greater wealth, many people do. Annual adjustments to Social Security can offer some assistance in this area. Below are key updates regarding Social Security changes for 2025.

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1. Increased Social Security Benefits through COLA

One beneficial aspect of Social Security is the yearly increase in benefits via cost-of-living adjustments (COLAs). These adjustments help recipients keep pace with inflation, preventing a decline in purchasing power. For 2025, there will be a COLA of 2.5%. This figure is just slightly below the average 2.6% increase observed over the past two decades.

2. Higher Maximum Monthly Benefits

The average monthly Social Security retirement benefit reached $1,922 as of September, translating to roughly $23,000 annually. This amount may seem modest. However, individuals who have earned above average during their careers can receive more.

For 2025, the new maximum monthly benefit is set at $5,108, which amounts to about $61,300 annually. This is an increase from $4,873 in 2024. Despite this, few people will actually qualify for the maximum amount since they need to…

• Earn at least the maximum annual income, which will be $176,100 for 2025, a figure that has remained consistently high in recent years.
• Maintain that maximum income for a minimum of 35 years.
• Delay collecting benefits until they reach 70 years of age.

Even if you don’t qualify for the maximum benefit, remember that there are strategies to increase your future benefits, such as choosing the right age to claim them, with 70 being the best option for most individuals.

3. Expanded Income Subject to Social Security Tax

Many may not realize that 6.2% of their paycheck goes to Social Security (along with 1.45% for Medicare), and employers contribute an equal amount. While these rates will stay the same in 2025, the income level taxed for Social Security is increasing from $168,600 to $176,100.

This means that if you earn $75,000 or $176,100, your entire income is taxed. Conversely, if your income is $1,176,100, only $176,100 will be taxed for Social Security and the remaining $1 million will not.

4. Rising Earnings Limits

The earnings limit is also increasing. If you haven’t reached your full retirement age (FRA) and continue to work while collecting Social Security, there’s a cap on how much you can earn before benefits are withheld. The full retirement age is 66 for most and 67 for those born in 1960 or later.

For those under FRA in 2025, the limit will rise to $23,400 from $22,500 in 2024. Exceeding this limit results in a deduction of $1 in benefits for every $2 earned over. For those who reach the FRA, the limit will be $62,160, up from $59,520, with withholding set at $1 for every $3 earned over that threshold.

While this may sound unfavorable, it’s important to note that withheld amounts often return as increased future benefits.

5. Increased Disability Benefits

The Social Security Administration (SSA) estimates that average monthly benefits for disabled workers, along with their spouses and children, will reach $2,826 in 2025, up from $2,757. For all disabled workers, the average will increase from $1,542 to $1,580.

6. Rising Benefits for Survivors

Survivors, including widows, widowers, and surviving children, will also see an increase in Social Security benefits. According to the SSA, benefits for aged widows or widowers will rise to $1,832 from $1,788. A widowed mother with two children can expect an average monthly benefit of $3,761, up from $3,669.

7. Expected Increase in Medicare Part B Premiums

Turning to Medicare, many retirees have their Part B premiums automatically deducted from their Social Security benefits. The premium for 2024 is set at $174.70, and predictions suggest it may rise to $185 in 2025.

Social Security benefits play a crucial role for many retirees, helping millions to stay above the poverty line. Staying informed about these changes is essential for effective retirement planning.

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