Social Security recipients will face changes in 2025 aimed at keeping benefit payments aligned with inflation and wages. A recent survey from Nationwide Retirement Institute found that many Americans lack a basic understanding of the program, leading to costly financial planning mistakes.
Here are three key changes coming to Social Security in 2025:
1. Cost-of-Living Adjustment (COLA): Social Security benefits will receive a 2.5% COLA to account for inflation in 2025. This is the smallest benefit increase since 2021, reflecting downward trends in inflation.
* Retired workers can expect an additional $49 monthly income
* Spouses can expect an additional $22 monthly income
* Survivors and workers with disabilities can expect increases ranging from $38 to $39
2. Social Security Taxes: In 2025, the maximum taxable earnings limit will increase to $176,100, affecting some workers who currently pay more in taxes on their income. Workers making over this threshold will not pay taxes on all their income.
* Most workers pay 6.2% of their income in taxes
* The maximum tax burden is $10,918.20 per year
3. Maximum Social Security Benefit: The maximum monthly retired-worker benefit for new retirees will increase to $5,108 per month at age 70 and up to $4,043 at age 67.
These changes aim to ensure that Social Security benefits keep pace with inflation and wages, while also providing valuable insights into how the program works.
Source: https://www.fool.com/retirement/2024/12/20/social-security-2025-3-changes-surprise-retirees