INTRODUCTION:
Life has plenty of goods and challenges that could modify our lives. Change is the essence in life, but sometimes, some people find it harder to get along with it. As many lives change, so the changes in Social Security do. This is the federal agency that pays out millions to recipients from retirement, survivor, disability, and SSI benefits.And how they will affect retirement paychecks.
However, changes do not always come in negatively; they can also benefit Social Security in the coming year. If you’re currently eligible for retirement benefits, learn about the upcoming changes for 2025 and how they will affect retirement paychecks.
Increases:
Social Security payments usually increase every year as a cost-of-living adjustment, or COLA, designed to ensure that retirement paychecks have the same purchasing power over time as the cost of living goes up. There is no assurance that it will be the case every year. For COLA to take place, there must be some degree of inflation from one year to the next.
Luckily for most of 2022, the part that was marked by high inflation means an annual cost of living running flat through 2024. That means that Social Security benefits are likely to get a little bump in 2025.
The amount of that increase still is yet to be said, though, as each January’s COLA depends on past third-quarter inflation data.
The non-partisan Senior Citizens League currently estimates a 2.57% rise for the 2025 Social Security COLA. Although that is smaller than the 3.2% boost recipients will see in 2024, it is an increase, nonetheless.
Maximum payout:
Not every worker pays Social Security taxes on their full salary; so high earners only pay in up to a wage cap that rises annually. But there’s also a maximum limit on how much Social Security can pay out each month:.
In 2024, someone filing at full retirement age can receive a maximum of $3,822, but $4,873 if they delay benefits. As a sidebar, only beneficiaries who have reached full retirement age, worked, and paid into Social Security for the required number of years may be eligible for the maximum benefit payable each month. Moreover, to receive a $4,873 payment, retiring workers need to contribute up to the maximum taxable income.
Aside from these maximum monthly payments, retirees are also entitled to collect as much as $2,710 if they take their benefits before reaching full retirement age, with an average of $1,900 that they can receive.
Earnings Test Limit:
Contrary to what most people think, you can work and collect Social Security, too. Yes, it’s possible. However, if you’re getting your benefit payments and working still below full retirement age, some of those benefits will be withheld when your income goes above a certain limit known as the earnings test limit.
This year, the earnings test limit is $22,320. If your full retirement age hasn’t reached you yet, but you will reach it by the end of the year, then it is $59,520.
Next year, these limits will likely rise, and you may have more freedom to garner a bit more income without worrying about Social Security withholding. Let me make this clear: You don’t actually lose that percentage of your benefits that went over your earnings test limit.
This money will be put back into your monthly checks when you have reached an age sufficient for retirement. Also, keep in mind that the change could be either beneficial or harmful depending on the circumstances.
FAQ:
HOW MUCH CAN WE EXPECT COLA INCREASE FOR 2025?
The non supporting SENIOR CITIZENS LEAGUE estimates a 2.57% of increase.
WHAT WILL BE THE EARNING TEST LIMIT FOR THE full retirement BY THE END OF THE YEAR?
The limit for earnings this year is $22,320, until the test limit amount. If you will not reach your full retirement age by the close of this year, the test limit is $59,520.
HOW DOES A COLA CAN BE CALCULATED?
COLA can be calculated uses third-quarter inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers. This is in effect now.