These 5 Social Security Changes Will Happen in 2025 Regardless of Who Wins the Election

With the election coming up in November, all eyes are on the presidential candidates and how they might shape the future of Social Security if they claim the Oval Office. However, regardless of who wins the White House or control of Congress, some changes will be coming to Social Security in 2025.

Here are five aspects of the program that will be affected regardless of who governs.

1. Size of retirees’ checks

The first big change will affect current pensioners. Seniors who receive Social Security will see their payments increase next year. This is because automatic cost-of-living adjustments are built into the benefits program to help offset the erosion of purchasing power.

As the prices go up, so do the benefits. A formula looks at changes in a consumer price index to determine how high the COLA will be. Experts currently anticipate a 2.6 percent increase, though seniors won’t know for sure until October because the formula looks at third-quarter data.

2. The amount you need to earn to qualify for a work loan

Social Security is an “earned benefits” program. You must earn 40 work credits to be eligible for benefits, and you can earn up to four credits per year. You accumulate work credits by earning and paying taxes on the income you earn. In 2024, you must earn $1,730 to qualify for a work credit. So if you earn $6,920 this year, you’ll max out the four credits you’re eligible for.

The amount you need to earn to get a work credit increases every year to take account of rising wages. In 2023, for example, you could earn a work credit by earning just $1,640.

For those who work but don’t earn a ton, it’s worth paying attention to this change coming next year. You don’t want to find yourself with too few work credits to collect retirement benefits when you get older.

3. How much money you can earn without affecting your Social Security benefit

If you’ve reached full retirement age, you’re allowed to work as long as you want with no impact on your benefits. That’s not changing.

However, if you are under full retirement age is not the case. As soon as you reach a certain earnings threshold, you start losing some of your Social Security payments. Eventually, the money comes back to you when your benefits are recalculated at full retirement age, but in the meantime, you could find your Social Security checks disappear if your salary is too high.

The amount you can earn before this happens changes in 2025 (likely to increase) as it is indexed to inflation. This is good news because it means people will be able to bring home more with a paycheck and still receive benefits.

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The salary cap in 2024 is $22,320. The 2025 deadline has not been announced.

4. How old do you have to be to claim your benefit without penalties

Almost retirees will be affected by another fairly major change in 2025, which is introduced and occurs automatically.

The age at which they can claim full benefits is moving later. While those who turn 66 in 2024 can claim their full, unreduced benefits at 66 and 8 months, anyone not turning 66 by 2025 must wait until 66 and 10 months to start payments. Otherwise, they will face monthly early deposit penalties that apply to those who claim benefits before full retirement age.

That change was set in motion in 1983, when lawmakers passed a law requiring the full retirement age to be phased in later to help improve Social Security’s ailing finances.

5. Amount of income subject to social security tax

This change is one that high earners may be unhappy about. The maximum income subject to social security tax will be higher in 2025.

Social Security limits the amount of income you pay taxes on and get credit for when your benefits are calculated. The cap is $168,600 in 2024, but it’s indexed to inflation, so it will rise more next year. If you earn more than $168,600 in 2025, you can expect a higher Social Security tax bill next year once this limit is raised.

These changes happen because Social Security has provisions to deal with inflation and because of laws passed a long time ago. Regardless of who wins the election, seniors and future retirees will have to deal with the changes, so it pays to plan now.

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These 5 Social Security Changes Will Happen in 2025 No Matter Who Wins the Election was originally published by The Motley Fool