Will these Social Security changes impact you?
As you already know, this pattern never goes away, and the new year comes with changes in Social Security! January is the month that brings a couple of fresh rules regarding Social Security, and they include check amounts, taxes, credits, and, last but not least, new retirement age rules.
Why do you need to be aware of all of these changes? Because this gives you a huge advantage and might help you save more money in the long run. For example, this is your chance to see if the new adjustments make you eligible for various benefits. If you can make some profit out of this, why wouldn’t you do it, right?
What is essential to know is that these changes were happening regardless of the results of the election! But you still need to keep an eye on what changes might happen when the new Trump administration takes power.
Read on and discover what the new year brings for your Social Security!
How will Social Security credits work in 2025?
First of all, you have to know that if you want to be eligible for various Social Security benefits in 2025, you will need to earn more credits. This is one of the main Social Security changes that will affect most of us, and it’s better to be prepared and understand more about it.
These credits are essential if you plan to access Social Security benefits, including retirement, disability, Medicare, and survivor benefits for your family. If you don’t have enough credits, you won’t be eligible for payments.
In order to qualify for retirement benefits, you will need at least 40 credits. Also, it’s important to mention that you are able to earn up to four points per year. In 2025, you’ll need to make $1,810 in wages or self-employment income to earn one credit.
Planning to make the maximum of four credits this year? For this, your income must total at least $7,240. Compared to last year, this is an $80 increase because in 2024 you needed $1,730 for one credit or $6,920 for four credits.
If you are worried about inflation, you need to be aware that credit requirements adjust annually to account for inflation, so there is a high chance that they will increase in 2026.
But what happens if you have more than 40 credits? Will this increase your monthly Social Security benefit? The short answer is “no.” Instead, your benefit amount is calculated based on your lifetime earnings. This means that the more money you earn (up to a certain point) throughout your working years, the greater your monthly benefit.
Cost of living adjustment for 2025
Since we are talking about social security changes, we can’t skip COLA, which is one of the subjects that raises the attention of Americans every year. So what’s new?
The Social Security Administration (SSA) announced a 2.5% cost-of-living adjustment (COLA) for 2025. Compared to the last years, this is the smallest increase since 2020, and it follows a 3.2% adjustment in 2024.
But what does this 2.5% mean for retirees? Well, this means they will get more money, but it’s a modest increase. The average monthly payment will go up by $49. It used to be $1,927, and now it will be $1,976. If you are part of a married couple and you receive the benefits together, this one of the Social Security changes will get you $75 extra, and the monthly payment will be $3,089 instead of $3,014.
When COLA is determined, inflation rates play a big role, and most of the time the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from July, August, and September of the previous year is used to make the right adjustments that will be able to sustain the actual cost of living.
COLA has the purpose of making things easier for retirees and helping manage the rising costs, but it is mandatory to be aware that it will never lower the current prices. Groceries, utilities, and housing costs remain high, which means that even with the increase, many retirees may still struggle financially.
There are more Social Security changes that we need to discuss, but this one is a hot topic we urgently needed to cover.
New tax limits?
Of all the social security changes, we are finally talking about taxes. This is something many people want to get more info about, and we are here to deliver. In 2025, the maximum income subject to Social Security taxes will rise to $176,100, up $7,500 from the 2024 limit of $168,600. This is a huge change that was made to reflect the adjustments for inflation, and experts expect it to rise again next year in 2026.
The wage cap works in a simple way. Every year, Social Security taxes are taken out of your paycheck up to a certain income limit. In case you earn more than $176,100 in 2025, you will not need to pay Social Security taxes on any income above that amount.
This means that if you have an annual income of $200,000, Social Security taxes will only apply to the first $176,100 you earn. Despite all of this, Medicare taxes will still apply to all your earnings, as there’s no income limit for those taxes.
Social Security changes are such a big thing because, for example, this wage cap we were talking about affects how benefits are calculated. Because Social Security benefits are dependent on how much you earn up to the taxable limit, increasing them means that higher-income taxpayers will contribute more and may receive larger benefits in retirement.
Full retirement age in 2025
Unfortunately, this year you will have to wait a little bit longer to reach full retirement age (FRA). This is one of the Social Security changes and directly impacts seniors. Right now, FRA steadily increases for people born between 1955 and 1960, reaching 67 for those born in 1960 or after.
So, to make things clear, in 2025, FRA is 66 years and 10 months. Now, the big question is how this one of the Social Security changes will impact your benefits. This is a great question, and we have the answer to it right here.
If you retire at 62, your monthly payments will be lowered. The decrease is determined as 5/9 of 1% every month during the first 36 months prior to FRA. Then 5/12 of 1% each month for any extra months beyond 36.
Delaying retirement beyond FRA will increase your benefits. Your payments increase by 8% each year for every year you postpone getting Social Security after the FRA (up to age 70).
The Social Security earnings test
In case you decide that you still want to work while you are receiving social security benefits, you have to be aware that your earnings could temporarily reduce your monthly payment. This is one of the new social security changes, and it is called the Social Security Earnings Test. This will apply every year until you reach your full retirement age (FRA).
But before your benefits are affected by this change, you still have the chance to earn more. Let’s say you are below FRA. When this is the case, the Social Security Administration will withhold $1 in benefits for every $2 you earn over $23,400. This limit was increased from the former one of $22,320.
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