The Social Security program in the US serves as a retirement, disability, and family security shield for millions of citizens. There are going to be some important changes in this system in 2025, which can affect every beneficiary. Let’s know about these changes in detail: what changes are coming to social security in 2025? social security 2026 cola
1. Increase in COLA (Cost-of-Living Adjustment)
Social Security benefits are expected to increase by up to 3.2% in 2025, based on the COLA. This increase will be based on inflation (CPI-W) data. This means that:
- The average retirement benefit may increase from $2885.20 per year to $2977.52.
- Disability benefits and SSI (Supplemental Security Income) would also see similar increases.
2. Change in tax threshold
There would be a revision of the tax limit on Social Security benefits:
- Currently, if your “combined income” exceeds $11540.78, 50% of the gains are taxable. This limit may increase to $13848.94 in 2025.
- Those earning more than $17311.17 will be taxed on 85% of their profits.
3. Possible adjustment in retirement age
The government is considering gradually raising the Full Retirement Age (FRA) from 67 to 68 years. Although this change will not come into effect until 2025, it remains a topic of discussion for future plans.
4. New rules for calculating benefits
Updated “Average Wage Index” data will be used to calculate Social Security benefits starting in 2025. This is likely to result in younger workers receiving higher benefits in the future.
5. Increase in work credit limit
Annual earnings limits will be increased for people who continue to work after disability or retirement:
- This limit was $20773.41 in 2024, which could go up to $21933.25 in 2025.
- Earning more than this would result in a reduction in benefits.
6. Improvements in spousal and widow/widower benefits
There is a plan to increase the widow/widower benefit received after the death of the spouse by 5%. Also, the rules for the benefits of the former spouse in cases of divorce will be simplified.
Impact: What should you do?
- Retirement Planning: Adjust your financial goals to the new COLA and tax rules.
- Check SSA Account: Update your estimated benefits on the Social Security Administration’s website.
- Consult a financial advisor: Plan your tax and investment strategies with professional assistance.
Frequently Asked Questions (FAQs)
Q1: Will the Social Security fund run out in 2025?
A: No, according to reports, the fund will last until 2035, but benefits are expected to be cut by 20%.
Q2: Will these changes apply to SSI as well?
A: Yes, SSI beneficiaries will also benefit from the COLA and other modifications.
Conclusion:
Social Security changes in 2025 are intended to update the system to keep up with inflation and a changing population. Start preparing early to get the most out of these updates.
(Note: This information is based on proposed changes. The final decision will be announced by the US government.