Social Security might seem like an unexciting topic, but unless you're independently wealthy, you should want to know a lot about it -- especially as you get older. Consider this from the Social Security Administration: "Among Social Security beneficiaries age 65 and older, 12% of men and 15% of women rely on Social Security for 90% or more of their income." And this, also among beneficiaries: 37% of men and 42% of women get at least 50% of their income from Social Security.
The average monthly Social Security retirement benefit was only $1,920 as of August, amounting to about $23,000 annually. That's not a lot, but it's an average, as millions get more. And better still, benefit checks tend to grow over time, and various rules get tweaked, too.
Image source: Getty Images.
Here are six recent and upcoming changes to know about now.
1. There's a new COLA coming for 2025
In most years, there's a cost of living adjustment (COLA) that's applied to retirement benefits. Here are some recent COLAS:
|
Year |
COLA |
|---|---|
|
2024 |
3.2% |
|
2023 |
8.7% |
|
2022 |
5.9% |
|
2021 |
1.3% |
|
2020 |
1.6% |
|
2019 |
2.8% |
|
2018 |
2% |
|
2017 |
0.3% |
|
2016 |
0% |
|
2015 |
1.7% |
Source: Social Security Administration. Chart by author.
Those COLAs may seem modest, but even a $60 bump per month amounts to $720 more over the course of the year. The higher benefit continues into future years, as well, while increasing even more in most years.
What's the COLA for 2025? We'll soon know. The latest estimate is 2.5% (per the Senior Citizens League). The actual number should be revealed on Oct. 10 on the Social Security Administration's website.
Note that for most people, it's smart to delay starting to collect benefits until age 70 if you want to get the most income, in total, from Social Security. It will also maximize your benefit, so every COLA you receive will deliver more dollars. If you're receiving $2,000 per month, a 3% increase would mean $60 more, while a 3% increase on a $2,500 benefit means $75 more.
2. The earnings-test limit is rising for 2025
Another Social Security number that increases in most years is the earnings-test limit. It comes into play if you're still working and earning money while collecting Social Security before your full retirement age. (That's 66 or 67 for most people and 67 for those born in or after 1960.)
If that's you, know that there's a limit to what you can earn before Social Security starts reducing your benefit. For 2024, Social Security will reduce your monthly benefits by $1 for every $2 you earn over $22,320 -- if you won't reach your full retirement age this year. For those who will hit their full retirement age this year, the threshold is a more generous $59,520, with benefits reduced by $1 for every $3 earned beyond the limit.
Don't fret too much, though, because Social Security will adjust your future benefits to account for the withholding. So you won't really lose money.
3. The wage cap is rising for 2025
You may not realize it, but not all earnings are taxed for Social Security. There's a cap beyond which earnings aren't taxed. The cap is beyond reach for most people -- for 2024, it's $168,600. This means that someone earning $168,600 and someone earning, say, $33,168,600, will pay the same amount in taxes to Social Security.
As you might suspect, this strikes a lot of people as unfair. Removing this cap is one suggested way to strengthen Social Security (among others).
The wage cap is likely to be higher for 2025, and we'll likely learn the new number in October.
4. The maximum Social Security benefit will increase in 2025
There are multiple ways to increase your Social Security benefits -- but increases aren't unlimited. Every year, there's a maximum benefit, and for 2024, it's $3,822 per month ($45,864 for the year) -- for those who claim benefits at their full retirement age. For 2025, it will be somewhat higher.
You can make your benefits a bit larger by delaying claiming them until age 70, but in both cases, it's very hard to achieve the maximum benefit. Really hard. Nearly impossible.
5. More states might exempt Social Security income from taxation
Here's an interesting tidbit. Back in 2017, 37 states didn't tax residents' Social Security benefits. That number has been rising, with Kansas, Missouri, and Nevada joining the list in recent years.
Most recently, 41 states -- plus the District of Columbia -- don't tax Social Security (though the federal government does). There's a reasonable chance that it will be 42 or 43 within a few years.
6. Social Security's long-term outlook might change
Another set of numbers that often changes regarding Social Security relates to its long-term health. Per the 2024 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance trust fund, "reserves will be depleted in 2035." That's a year later than the previous estimate, which is good news.
The problem is simple: With people living longer and often retiring earlier, obligations to retirees are going to outstrip Social Security's incoming tax revenue. For a long time, the program ran a surplus, but that surplus will run dry if changes aren't made. We still have time to make those changes, though, and there are plenty of changes that could be made.
In the meantime, the trustees estimate that without any changes, come 2035, beneficiaries will receive only 83% of what they're due. (That's actually up from 80% estimated in the 2023 report.)
These are some important Social Security changes to be aware of and to look out for in the weeks and years ahead. Be sure to factor Social Security into your overall retirement plan.
