One thing people quickly realize about Social Security is that change is virtually inevitable. Rules change, eligibility requirements change, payments change, but there's no reason to believe this will stop anytime soon or even stop.
some social security Changes apply only to specific groups of people, while other changes apply to most current or future recipients.
Regarding the latter, there are two major changes to be aware of heading into 2025. Even if you're not currently receiving benefits, it's worth knowing because it may be relevant to your future retirement plans.
The most notable changes to Social Security benefits in 2025 should be good news. All current beneficiaries will receive increased monthly benefits thanks to Social Security. Adjusting the cost of living (Cola).
The annual COLA is intended to offset the effects of inflation. The prices of most goods and services, such as food, clothing, and housing, appear to be rising steadily. And the impact is even greater for people on fixed income sources such as Social Security.
Fortunately, beneficiaries can expect their monthly benefits to increase by 2.5% starting in January 2025.
The 2.5% increase is below the average COLA since COLAs became annual in 1975, but it could be even worse. There were a few cases where the benefits didn't change, which is more unusual than usual. Below are the past 10 COLAs.
|
year |
cola |
|---|---|
|
2015 |
1.7% |
|
2016 |
0% |
|
2017 |
0.3% |
|
2018 |
2% |
|
2019 |
2.8% |
|
2020 |
1.6% |
|
2021 |
1.3% |
|
2022 |
5.9% |
|
2023 |
8.7% |
|
2024 |
3.2% |
Source: Social Security Administration.
Social Security uses inflation data from the previous year's July, August, and September to determine your COLA for the following year. So while a 2.5% COLA seems conservative, it also means that inflation is not as high as it has been in recent years. I think many retirees don't mind this trade-off.
Most American workers spend their careers paying Social Security payroll taxes. If you have an employer, you split the 12.4% Social Security tax between the two of you, each paying 6.2%. If you are self-employed, you are responsible for paying the full 12.4%.
The (kind of) good news is that not all of some workers' income is subject to Social Security payroll taxes, but only up to a certain amount called the wage threshold.
The new wage standard cap that goes into effect in 2025 is $176,100, up from the 2024 cap of $168,600. This means that more of some workers' income will be subject to Social Security payroll taxes.
