Everything is going to change in retirement in the US starting in 2025 – Social Security benefits are also going to change

By Allen

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Everything is going to change in retirement in the US starting in 2025 – Social Security benefits are also going to change

There is always change, and Social Security is no exception. Every year, the program is changed to make sure that the people who benefit get the best care possible and that the system keeps up with how society changes. New retirees need to know about these changes right away. If you are retiring in 2025, here are some things you should keep in mind.

How Your Social Security Benefits Are Determined

It’s likely that you already know this, but just in case, your Social Security payments are based on the 35 years in which you made the most money. A lot of people who work pay taxes to the Social Security Administration (SSA). How much you earned, or how much you paid in taxes, will be used to figure out how much you will get back.

Because of this, it is very important that you let the SSA know about any changes in your job or income. If you don’t already have one, make one now and check your “my social Security account” to make sure the SSA has the right information about you. It’s easier to fix a record as it’s happening than to wait years.

Full Retirement Age

“Full retirement age (FRA)” (SSA) is the age at which you can get your full monthly payment based on how much you earned during your career.

This age is different for people born in different years, and it has been raised over the years from 65 to 67. Not getting benefits until you turn 70, on the other hand, is likely to work in your favor because that’s when you can get the most money.

Everything is going to change in retirement in the US starting in 2025 – Social Security benefits are also going to change
Source (Google.com)

Cost-of-Living Adjustment

Social Security recipients get cost-of-living adjustments (COLA) every year to keep up with inflation, even though their payments are called “fixed income.” It will be 2.5% in 2025, which will add $48 a month to the average retirement check. A formula is used to figure out the COLA.

The formula looks at the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data from the third quarter. People have tried to change the CPI used for the CPI-E, but it has not been done yet. This is because the current CPI gives more weight to categories like healthcare, which changes the data for people over 62.

Income Taxes on Benefits

Most states don’t tax Social Security benefits, but the SSA says that about 40% of beneficiaries still have to pay federal taxes on their benefits. However, many people have other sources of income, like passive income or retirement accounts, that mean they are taxed by the federal government, even though Social Security income is not taxed.

If a single person hasn’t reached FRA yet and their provisional income is less than $25,000, their Social Security benefits won’t be taxed.

For married couples filing jointly, the limit goes up to $32,000. If your pre-tax income is between $25,000 and $34,000 for single filers or $32,000 and $44,000 for joint filers, you may have to pay taxes on up to half of your Social Security benefits.

If your income is higher than these ranges, you might have to pay taxes on up to 85% of your benefits. But people who start getting Social Security benefits after 2025, when they reach full retirement age, will not have to pay taxes on them.

Earnings Test

In spite of what most people think, you can get benefits while working. However, the benefits you get will be lessened because of an earnings test that lowers your benefits before you reach FRA.

If you are below FRA for the whole year, the SSA will cut your benefits by $1 for every $2 you earn over the annual limit. They will only count earnings from the month before you reached FRA. The most that recipients who haven’t reached FRA can earn is $22,320 in 2024. In 2025, it will go up to $23,400.

Read Also :- Bad news for retirees who collect Social Security in the US – There is 1 change for 2025 that will affect them for the worse


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