One thing people quickly notice about Social Security is that change is virtually inevitable. Rules change, eligibility requirements change, payments change, and there’s no reason to think this will stop any time soon – if ever.

Some Social Security changes apply only to certain groups of people, but others apply to most current or new recipients.

Regarding the latter, there are two important changes we need to be aware of as we head into 2025. Even if you are not currently a pensioner, they are worth knowing as they could still be relevant to your future retirement plans.

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1. Monthly benefits will be higher in 2025

The most notable change to Social Security benefits in 2025 may be good news. All current recipients will receive an increase in their monthly benefit thanks to the Social Security Cost of Living Adjustment (COLA).

The annual COLA is intended to offset the effects of inflation. Whether food, clothing or housing: the prices for most goods and services seem to be rising steadily. And it has an even bigger impact for those who have fixed sources of income like Social Security.

Fortunately, beginning in January 2025, recipients can expect a 2.5% increase in their monthly benefits.

A 2.5% increase is below the average COLA since the annual rate was introduced in 1975, but it could be worse. There have been some cases where performances remained the same, but this is more of an anomaly than the norm. Below are the final 10 COLAs:

Source: Social Security Administration.

Social Security uses inflation data from July, August and September of the previous year to determine the COLA for the coming year. Although the 2.5% COLA seems modest, it also means that inflation has not been as high as in recent years. I’m sure many retirees won’t mind making this trade-off.

2. More income will be subject to Social Security tax in 2025

Most U.S. workers spend their careers paying Social Security payroll taxes. If you have an employer, you both split the 12.4% Social Security tax and pay 6.2% each. If you are self-employed, you are responsible for paying the full 12.4%.

The (sort of) good news is that not all of some workers’ income may be subject to Social Security payroll taxes – only up to a certain amount, called the wage base limit.

The new wage base limit, which will take effect in 2025, is $176,100, higher than the $168,600 limit in 2024. That means higher income for some workers will be subject to Social Security payroll taxes.

For example, if you earned $175,000 in 2024, $6,400 would be exempt from Social Security payroll taxes. However, if you earn $175,000 in 2025, the entire amount will be taxable because it is below the new wage base limit.

Below are the basic salary limits for the last 10:

Source: Social Security Administration.

Aside from the tax implications, it is important to know the annual wage base limit if you want to receive the maximum possible monthly benefit ($5,108 in 2025). To be eligible for the maximum benefit, you must delay filing until age 70 (the latest age at which benefits increase through deferral) and you must be in the 35 years that Social Security uses to calculate your monthly benefit who have earned above the basic wage limit.

Wage caps don’t directly affect current Social Security recipients, but it’s still worth being aware of annual changes because they can give you an idea of ​​the health and direction of the program.

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