The cat has been out of the bag for weeks about one major Social Security change coming in 2025. In October, the Social Security Administration (SSA) announced a 2.5% cost-of-living adjustment (COLA) for the new year.
If you receive Social Security benefits or will soon do so, you're probably already aware of the COLA news. But other Social Security changes are on the way in 2025, too. One is arguably the most important of the bunch other than the COLA.
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Multiple changes in the new year
One change for Social Security in the new year is relatively mundane. During the worst of the COVID-19 pandemic, local Social Security offices were closed. Those offices reopened in April 2022, but the SSA recommended that individuals needing help make appointments in advance. In 2025, this suggestion will become a requirement -- at least in most cases. Beginning Jan. 6, 2025, anyone seeking assistance from a field office must schedule an appointment.
Only high earners will be affected by yet another Social Security change. In 2024, the maximum annual earnings subject to the Social Security portion of the FICA tax is $168,600. In 2025, this maximum taxable earnings will increase to $176,100.
If you begin receiving Social Security retirement benefits before reaching your full retirement age (FRA) and continue to work, the SSA could temporarily "claw back" some of your benefits if your earnings are higher than a set limit. In 2024, $1 in benefits will be deducted for every $3 earned above $22,320 for anyone under their FRA for the entire year. During the year you reach your FRA, $1 in benefits will be deducted for every $3 earned above $59,520.
These earnings limits for early retirees who continue working will increase in 2025. Instead of $22,320, the new limit will be $23,400. Instead of $59,520, the new limit will be $62,160.
The FRA has increased by two months annually for several years. It will do so again in 2025. The FRA will be 66 years and eight months for anyone born in 1958 and will be 66 years and 10 months for anyone born in 1959. If you were born in 1960 or afterward, your FRA is 67.
The other major Social Security change on the way
While the COLA affects all Social Security beneficiaries, the changes mentioned previously only affect some people. Not everyone will need help from an SSA field office next year. Most people don't make enough money to be affected by the increased maximum taxable earnings. Not everyone retires early, and, of those that do, not all of them continue to work. The FRA increase only affects people born in 1958 or 1959.
However, one other major Social Security change is coming in the new year. I'd argue it's the most important change on the way other than the COLA.
To qualify for Social Security retirement benefits, a person must earn at least 40 Social Security credits (the SSA calls these credits "quarters of coverage"). A maximum of four credits can be earned per year. In 2024, an individual needed to earn $1,730 to receive one credit. Next year, the threshold for receiving one credit will increase by $80 to $1,810.
This change might not seem terribly important. Most people probably wouldn't even notice it. However, it will affect every worker who hasn't already qualified for Social Security retirement benefits. As the SSA states on its website: "We cannot pay benefits to you if you don't have enough credits." I'd say that any change to the criteria for qualifying for Social Security benefits is a pretty big deal.
Looking beyond 2025
It's a certainty that significant Social Security changes will come beyond 2025. Why? Social Security is on track to become insolvent in 2035 unless reforms are made. Steep benefit cuts will be needed without changes to increase revenue to the federal program. A 2.5% COLA and an $80 increase to the threshold for earning one Social Security credit will pale in comparison to the changes that will likely be needed to avoid this calamity.
