More than 70 million beneficiaries rely on Social Security payments to cover essential needs, combat poverty, or enjoy their retirement life. Whether you’re using it now or planning for the future, staying informed about Social Security news and upcoming changes is crucial. The Social Security Administration (SSA), established in 1935, continuously evolves to meet beneficiaries’ needs, though changes aren’t always favorable for everyone.
One of the most anticipated changes is the cost of living adjustment (COLA). In 2024, Social Security payments increased by 3.2%. However, predictions for 2025 suggest a smaller increase, ranging between 2.6% and 3.2%.
The purpose of COLA is to protect retirees’ purchasing power amid rising costs. Unfortunately, according to the Senior Citizens League, beneficiaries have lost 36% of their purchasing power since 2000 due to a flawed COLA calculation method. Consequently, retirement incomes might lag even more in 2025 with a reduced COLA.
Retirement Age
Another significant change concerns the full retirement age (FRA). For those born in 1959, who turn 66 in 2024, the FRA will be 66 years and 10 months. For those born in 1960 or later, the FRA will increase to 67 by 2026. These adjustments, introduced by reforms in the 1980s, aim to stabilize the program’s finances.
With the Social Security trust fund facing potential shortfalls, future reforms could further increase the FRA. Currently, no changes beyond 2026 are expected. However, individuals retiring before reaching FRA will face penalties for early retirement, reducing their lifetime benefits.
Tax Cap
Lastly, the maximum taxable earnings subject to Social Security taxes will rise. This change affects high earners. Currently, the cap is $168,600. This amount typically increases yearly to keep pace with wage growth. In 2023, the cap was $160,200. Preliminary estimates by the Social Security Trustees suggest the cap will increase to $174,900 in 2025. Thus, workers earning more than $168,600 might pay Social Security taxes on an additional $6,300.
Social Security Changes (2023-2025)
Year
COLA Increase
FRA (for those born 1959)
Max Taxable Earnings
2023
3.2%
66 years 10 months
$160,200
2024
2.6% – 3.2%
66 years 10 months
$168,600
2025
TBD
67 years (born 1960+)
$174,900
These changes highlight the importance of staying informed about Social Security adjustments. For current and future retirees, knowing these modifications can help in planning and securing financial stability. Whether it’s the COLA increase, changes to the full retirement age, or the rise in taxable earnings, each adjustment has significant implications for your retirement plans.
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A tax law expert with a knack for breaking down complex regulations into digestible insights. Ehsteem's articles on the tax news blog offer invaluable guidance to readers navigating changes in tax legislation.
