Everything You Need to Know About Social Security Changes for Retirees

According to Lagradaonline, Social Security plays a vital role in the financial stability of many Americans, with approximately 96.7% of adults aged 60 to 89 receiving support from the program. As of August 2024, the average monthly benefit for retired workers was about $1,920. For many, Social Security constitutes a significant portion of their income, with 50% of those aged 65 and older relying on it for half of their total earnings, and around 25% depending on it for 90% or more of their income.

COLA Announcement for 2025

The Social Security Administration (SSA) has recently announced a 2.5% increase in benefits for the upcoming year. This adjustment will affect nearly 73 million Americans, translating to an approximate $50 increase per month. For example, if your current monthly benefit is $1,920, it will rise to about $1,968 starting in January 2025. Additionally, Supplemental Security Income (SSI) payments will see a corresponding increase on December 31, 2024.

The 2024 COLA was 3.2%, and over the past decade, the average adjustment has been around 2.6%. While a 2.5% increase may not seem substantial, it is intended to help beneficiaries keep pace with inflation, which averaged 2.4% for the 12 months ending September 2024.

Changes to Maximum Taxable Income

Beginning in January 2025, the maximum taxable earnings subject to Social Security taxes will increase from $168,600 to $176,100. This change is particularly relevant for those nearing retirement age. Currently, the Social Security tax rate stands at 12.4%, divided equally between employees and employers at 6.2% each.

With the new cap, employees will contribute up to $10,918.20 in 2025, compared to $10,453.20 in 2024. Employers will also match this amount. It’s important to note that self-employed individuals will continue to pay the full 12.4%, resulting in an annual tax of $21,836.40 on earnings up to $176,100.

Also read: Important Dates: Social Security Payments of Up to $1,415 and $4,873 in November

Important Notices in December

If you receive Social Security benefits, expect to receive a notice detailing your final benefit amount as early as December 2024. This year’s COLA statement will feature a more straightforward design, making it easier to understand.

Tracking Your Benefits

To stay informed, you can track your COLA notice online by creating a My Social Security account, allowing you to receive updates faster than waiting for a physical notice. Additionally, you can sign up for email or text alerts for important updates.

Changes to Medicare

As Medicare will also undergo changes in 2025, it’s advisable to visit Medicare.gov for the latest information. If you are enrolled in both Social Security and Medicare, you can access the message center for both accounts to monitor your new benefit amount, with updates beginning at the end of November.

Conclusion

The adjustments in Social Security for 2025 reflect ongoing efforts to help beneficiaries keep up with the rising cost of living while also addressing changes in taxable income. Staying informed about these updates is essential for effective retirement planning.