These two changes to Social Security in 2025 could put more money in retirees’ pockets

Social Security is now a major source of income for millions of retired Americans. Although the program has been around for many decades, it undergoes changes from year to year. And some of those changes are positive and can improve retirees’ finances.

In 2025, Social Security is expected to undergo two major changes that may give you more financial flexibility. Here’s what to expect in January.

1. A higher monthly benefit

Each year, Social Security benefits can be adjusted for the cost of living. The purpose of COLAs is to ensure seniors can maintain their purchasing power as inflation drives prices up over time.

In 2024, Social Security benefits increased by 3.2%. However, inflation has cooled sharply in 2024 compared to 2023. For this reason, Social Security’s COLA is not expected to be as high in 2025 as it was in 2024.

We won’t know exactly what Social Security’s COLA will look like in 2025 until October 10. That’s because that number is based specifically on third-quarter inflation numbers. Since September isn’t over yet, it’s too early for that data.

However, recent estimates put the COLA at 2.5% in 2025. While that number could change slightly (either up or down), at this point it’s safe to assume that Social Security benefits will increase by some amount in the new year.

Remember that although social security benefits justified With an annual COLA, those monthly payments could stay the same unless inflation increases, but that’s unlikely to happen in 2025, meaning you can expect an increase in your monthly checks.

If you are disappointed by the initial estimate of 2.5%, you should realize that you are losing in the form of a lower COLA but gaining in lower inflation.

2. A higher income limit

Retirees who receive Social Security benefits are allowed to earn money at the same time. Once you reach full retirement age, you can earn as much as you want without that money negatively affecting your Social Security payments.

However, if you work and receive benefits before you reach full retirement age, you will be subject to an income limit. Exceeding this limit will generally result in some of your benefits being withheld.

This year, the income limits are $22,320 for those who do not fully retire in 2024 and $59,520 for those who Are Reach full retirement age in 2024. In 2025, these limits will likely rise in line with inflation. But as with next year’s COLA, we won’t have an official number until October 10.

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Get ready for positive news

If you rely on Social Security to make ends meet, know that things are likely to improve in 2025. Not only should your monthly payments increase, but you should also have the opportunity to earn more money in the new year without risking having your benefits taken away. It’s worth checking the Social Security Administration’s website on October 10 to learn more about the positive changes that are coming.

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These two changes to Social Security in 2025 could put more money in retirees’ pockets. Original article from The Motley Fool