Social Security is a vital source of income for more than 51 million retired workers in the United States. Therefore, it is crucial that beneficiaries stay informed about any modifications that the Social Security Administration (SSA) or the United States government implements to the program. Next, We present three significant changes that will come into effect in January 2025.
In August 2024, most of these beneficiaries relied on their monthly payments to cover their needs. In fact, Nearly 90% of retired workers consider Social Security an important part of their incomeaccording to Gallup. Due to this, older adults are the ones who should be most attentive to any information that arises about their benefits, especially when changes are expected in the amounts and the dynamics in which benefits are sent.
1. Cost of Living Adjustment (COLA) in 2025
One of the most relevant news this month is that Social Security benefits will receive a cost of living adjustment (COLA) in 2025. This adjustment is designed to protect profits from inflation and is based on a consumer price index known as CPI-W. The 2025 COLA will be especially important as inflation has been one of the biggest financial concerns for Americans for three years in a row.
The exact COLA figure will be determined by the percentage increase in the CPI-W during the third quarter of 2024. This information will be published on October 10. Shortly after the Bureau of Labor Statistics (BLS) report, SSA will release the COLA that will apply to 2025 benefits.
The Senior Citizens League estimates that profits will increase by 2.5%. This adjustment translates into additional income for many beneficiaries. For example, a retired worker could see their monthly income increase from $1,920 to $1,968.
2. Increase in the full retirement age (FRA)
Another important change is that the Social Security full retirement age (FRA) will increase in 2025. The FRA is the age at which the benefit a retired worker receives equals his or her primary insurance amount (PIA).. This age varies depending on the year of birth. This is the FRA, according to the year of the beneficiary’s birth:
- FRA at age 66 for those born between 1943-1954
- FRA at 66 years and 2 months for those born in 1955
- FRA at 66 years and 4 months for those born in 1956
- FRA at 66 years and 6 months for those born in 1957
- FRA at 66 years and 8 months for those born in 1958
- FRA at 66 years and 10 months for those born in 1959
- FRA at age 67 for those born in 1960 and later
Based on this information, two groups of workers will reach (or have already achieved) FRA this year: first, those born in the second half of 1957 reached FRA at 66 and 6 months during the first half of 2024; and, second, those born in the first four months of 1958 will reach FRA at 66 and 8 months during the last four months of 2024.
This change has a significant impact on those who plan to claim their benefits. If a worker claims before reaching FRA, they will receive a reduced benefit. Instead, those who wait until after FRA may receive an increase in their payments. This aspect is crucial for financial planning in retirement.
3. FRA Minor Worker Benefit Withholdings
Finally, a third change will affect retired workers who have not yet reached FRA. Although they can begin receiving benefits as early as age 62, those who continue working above a certain income will have some of their benefits withheld. In 2025, the lower limit is estimated to increase to $23,280 and the upper limit to $61,800.
Beneficiaries who exceed these limits will have $1 in benefits withheld for every $2 or $3 they earn, depending on whether they reach FRA during the year. It is essential that beneficiaries are aware of these limits, as they may influence their employment and financial decisions.
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