The ins and outs of Social Security are hard to understand, especially for people who are not retired yet. It can feel like a full-time job to keep up with the news and the show changes every year. Most of the changes won’t affect retirees, which is good. However, future beneficiaries will need to keep some of these changes in mind in order to plan for their retirement.
Social Security recipients will get bigger benefits
People who are retired are said to be on “fixed income,” but that doesn’t mean their income doesn’t change. The name comes from the fact that when someone retires, their average monthly earnings are used to figure out a fixed amount of primary insurance.
This amount is used to determine how much their benefits will grow in the future. Once you turn 70 or stop working, you can’t change the amount of your primary insurance.
Cost of living adjustments (COLAs), on the other hand, help retirees keep up with inflation by raising their benefits every year. The COLA increase for 2025 is 2.5%, and benefits will be changed to reflect that.
The maximum benefit for retirees is increasing
There is a maximum benefit set every year for Social Security because it is not a system that can be expanded. For a retiree to get this benefit, they would need to:
- Earn the maximum taxable income for at least 35 years.
- Delay collecting benefits until age 70.
The biggest benefit in 2024 was $4,873, and the biggest income that had to be taxed was $168,600. Along with the COLA, these amounts have also gone up. In 2025, the highest monthly benefit will be $5,108 and the highest taxable income will be $176,100.
The maximum payment is out of reach for most people, but getting as close to it as possible will help your finances in the long run.
High earners will pay more in Social Security taxes
We’ve already talked about how workers must pay a certain amount of taxable income in order to get the most benefits. This is also the most that is taxed for Social Security.
If you earn less than $176,100 in 2025, you will be taxed on it, but if you earn more than that, it won’t count toward your Social Security benefits. This is because the cap works both ways.
Some people think this system is unfair because low-income people, who need the money the most, have all of their income taxed, while high-income people who don’t need the program get the most out of it and save even more. Several plans have been made to fix this, but none of them have been approved.
The Social Security surplus is getting closer to running out
Taking away the cap on Social Security taxes is a popular idea because the Trust Fund that helps pay for the program is running out of money and payroll taxes aren’t enough to keep it going.
“Reserves will be depleted in 2035,” says the 2024 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance trust fund.
For this reason, there are ten years left to find a way to make Social Security stronger and make sure that all benefits are paid even after the Trust runs out. Retirees will get no more than 83% of what they’re owed if nothing is done.
Every day, lawmakers look at new bills. So far, none of them have passed—some are very unpopular, like raising the retirement age—but Congress wants to be able to pay benefits after the Trust’s expiration date.
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