With an election coming up in November, all eyes are on the presidential candidates and how they could shape the future of Social Security if they claim the Oval Office. However, no matter who wins the White House or control of Congress, some changes are going to happen to Social Security in 2025.
Here are five aspects of the program that will be affected regardless of who rules.
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1. The size of retirees' checks
The first big change will impact current retirees. Seniors who are receiving Social Security will see their payments get bigger next year. This is happening because automatic cost-of-living adjustments are built into the benefits program to help offset the erosion of buying power.
As prices go up, benefits do, too. A formula looks at changes to a consumer price index to determine how big the COLA will be. Pundits are currently projecting a 2.6% increase, although seniors won't know for sure until October as the formula looks at data from the third quarter.
2. The amount you must earn to qualify for a work credit
Social Security is an "earned benefits" program. You must earn 40 work credits to become eligible for benefits, and can earn up to four credits per year. You accumulate work credits by earning and paying taxes on the income you earn. In 2024, you must earn $1,730 to qualify for one work credit. So, if you make $6,920 this year, you'll max out the four credits you're eligible for.
The amount you must earn to get a work credit increases each year to account for wage growth. In 2023, for example, you could earn a work credit by making just $1,640.
For those who are working but not earning a ton, it's worth paying attention to this change that's coming next year. You don't want to find yourself with too few work credits to collect retirement benefits when you get older.
3. How much money you can make without affecting your Social Security benefit
If you have reached your full retirement age, you are allowed to work as much as you'd like with no impact on your benefits. That's not changing.
However, if you're under your full retirement age, that's not the case. As soon as you hit a certain earnings threshold, you start to forfeit some of your Social Security payments. Eventually, the money comes back to you when your benefits are recalculated at full retirement age, but in the meantime, you could find your Social Security checks disappear if your salary is too high.
The amount you can earn before this happens is changing in 2025 (likely going up) because it's indexed to inflation. This is good news, as it means people will be able to bring home more in a paycheck and still get benefits.
The wage limit in 2024 is $22,320. The 2025 limit has not been announced.
4. How old you must be to claim your benefit without any penalties
Near retirees will be impacted by another pretty major change in 2025, which is baked in and happening automatically.
The age at which they can claim full benefits is moving later. While those who turn 66 in 2024 can claim their full, unreduced benefits at 66 and 8 months, anyone who is not turning 66 until 2025 must wait to start their payments until 66 and 10 months. Otherwise, they will face monthly early filing penalties that apply to those who claim benefits before full retirement age.
This change was set in motion in 1983 when lawmakers passed a law requiring full retirement age to gradually move later to help improve Social Security's struggling finances.
5. The amount of income subject to Social Security tax
This change is one that high earners may be unhappy about. The maximum income subject to Social Security tax will be higher in 2025.
Social Security caps the amount of income you pay taxes on and get credit for when benefits are calculated. The cap is $168,600 in 2024 but is indexed to inflation, so it will climb higher next year. If you make more than $168,600 in 2025, you can expect a higher Social Security tax bill next year once this limit is increased.
These changes happen because Social Security has provisions to deal with inflation and because of laws passed a long time ago. No matter who wins the election, seniors and future retirees will have to cope with the modifications, so it's worth planning now.
