As 2025 approaches, retirees and Social Security beneficiaries can expect important changes that will affect their finances. These adjustments will impact not just retirees but also people still working and those receiving disability benefits.
Knowing about these updates before the New Year will help you better plan and manage your money.
2.5% COLA Adjustment: Small but Helpful
In 2025, Social Security benefits will increase by 2.5% through a cost-of-living adjustment (COLA). This change is based on inflation data from the third quarter of the year, where inflation was lower than expected.
For retirees, this means a boost in the monthly benefit. The average monthly payment for retired workers will rise from $1,927 to $1,976. Couples receiving benefits will see their monthly payments increase from $3,014 to $3,089.
While this increase is helpful, it is still a modest amount, especially considering the rising costs of housing, healthcare, and other living expenses. Still, the COLA reflects a sign that inflation may be cooling down, bringing hope for more significant improvements in the future.
Higher Earnings Limits: Bigger Contributions, Bigger Future Benefits
For those who continue to work while receiving Social Security, there is an increase in the earnings limits for 2025. The maximum earnings subject to Social Security taxes will rise to $176,100, up from $168,600 in 2024.
This means that high-income workers will pay more into the system, but it also increases the potential for larger benefits when they retire.
Working Retirees Get More Flexibility
Retirees who choose to keep working while receiving Social Security can benefit from the new earnings limits in 2025. For those under the full retirement age, the amount they can earn without losing benefits has increased.
You can now earn up to $23,400 annually ($1,950 per month) without having your benefits reduced. This is up from $22,320.
Once you reach full retirement age, the annual earnings limit will rise to $62,160 ($5,180 per month), up from $59,520. Any benefits withheld due to earnings will be recalculated into your future payout once you reach full retirement age.
SSDI Beneficiaries See Slight Increases
Social Security Disability Insurance (SSDI) recipients will also see some increases in their monthly benefits. Non-blind SSDI beneficiaries can now earn up to $1,620 per month, an increase from $1,550. For blind SSDI beneficiaries, the monthly earnings limit rises from $2,590 to $2,700.
The Trial Work Period threshold, which allows SSDI recipients to try working while still receiving benefits, will also increase to $1,160 per month.
SSI Payments Get a Boost
Supplemental Security Income (SSI) beneficiaries will see a small increase in their monthly payments. Individuals receiving SSI will get $967 per month, up from $943, and couples will receive $1,450 per month, up from $1,415.
This increase will help those living on fixed incomes better manage their everyday expenses.
Higher Maximum Benefits for Full-Retirement Workers
People who are planning to retire at full retirement age in 2025 will receive higher maximum monthly benefits. The new limit will be $4,018, up from $3,822 in 2024.
This increase rewards workers who have consistently earned higher wages and waited until full retirement age to claim benefits.
However, if you delay your retirement until age 70, you can receive even more. For example, if you retire at age 70 in 2024, your maximum benefit will be $4,873. In 2025, that amount will increase to $5,108.
Students Get Slight Adjustments, Resource Limits Stay the Same
Students who are receiving SSI will see some small adjustments. Monthly exclusions for students will rise to $2,350, up from $2,290, and the annual limit will increase to $9,460, up from $9,230.
However, the resource limits for SSI recipients, which are $2,000 for individuals and $3,000 for couples, remain unchanged. This has led some people to call for updating these resource limits to keep pace with the changing cost of living.
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