More than 50 million retired workers received Social Security benefits in the month of April 2024, these monthly disbursements are normally their largest source of income, in fact, a recent Gallup survey found that 88% of retirees depend in some part of Social Security, and 60% indicated that benefits were an “important source” of their income.
The Social Security program goes through some changes annually to keep benefits aligned with inflation and the overall wage level. Given the important role benefits play in retirement, it is critical that current beneficiaries (and future beneficiaries) remain informed. But a recent Nationwide Retirement Institute survey found that many Americans don’t understand the basics of the program. We’ll tell you three changes to Social Security that will occur in 2025 and that may surprise many people across the United States.
The Social Security COLA Increase: Smaller Than Expected?
Social Security benefits will have a cost-of-living adjustment (COLA) in 2025, the National Retirement Institute recently reported that 70% of adults surveyed incorrectly agreed with this statement : “Social Security is not protected against inflation.” That statement is incorrect, Social Security payments get an annual cost-of-living adjustment (COLA) to protect the purchasing power of the benefits.
The COLA that applies to benefits in a given year is based on how a subset of the Consumer Price Index (CPI) changed in the third quarter of last year, that is, the three-month period between July and September, to that end, the Social Security Administration cannot determine next year’s official COLA, 2025, until CPI data for the month of September is released in mid-October.
However, based on current consumer price trends, the Senior Citizen League estimates that benefits will increase 2.7% in 2025, but the nonprofit senior advocacy group has already revised its forecast raised several times due to higher-than-expected inflation in recent months, meaning the official 2025 COLA could be higher.
However, assuming Social Security benefits do indeed have a COLA of 2.7% next year, the average monthly benefit for retired workers would increase by approximately $51, bringing the total to $1,967.
More Taxes Over Social Security Benefits? Here’s What We Know So Far
Certain workers will have more Social Security taxes withheld from their paychecks in 2025. According to a study, 74% of adults surveyed incorrectly agreed with the following statement: “Workers pay Social Security taxes on all of their income.”
That statement is fictitious, the current law limits the income subject to the Social Security payroll tax, the maximum limit of income subject to tax is $168,600 in the year 2024, which means that any income that exceeds that amount It is not subject to tax by the Social Security program.
Many Could Lose Their Benefits
Certain Social Security beneficiaries will have benefits withheld in 2025, according to Nationwide, 46% of adults surveyed incorrectly disagreed with the following statement: “Some of your benefits may be withheld if you still “You are working before your full retirement age.” That statement is correct.
Those who work and receive Social Security may have part of their benefits temporarily withheld if they are below full retirement age and their income exceeds thresholds known as amounts exempt from the retirement income test, there is a limit below which applies to beneficiaries who are not of full retirement age during the entire year and an upper limit that applies to beneficiaries who will reach full retirement age throughout the year.