2025 Social Security Updates:Social Security beneficiaries will receive a 2.5% cost-of-living adjustment (COLA) in January 2025. The average monthly payment for retired workers is currently $1,925.46, which is expected to increase to around $1,974 with the COLA.
Changes in Social Security Formulas:The Social Security benefit formula remains the same, but adjustments are made to the “bend points.” The formula calculates benefits based on the average of your top 35 earning years, with multipliers of 90%, 32%, and 15%. For those becoming eligible in 2025, the formula is applied to the average indexed monthly earnings (AIME) as follows:
– 90% of the first $1,226
– 32% of the amount between $1,226 and $7,391
– 15% of any AIME exceeding $7,391
Increased Maximum Benefits:Due to inflation-related adjustments, the maximum Social Security benefit for those retiring at full retirement age in 2025 will be $4,018 per month. The maximum benefits for those retiring at 62 and 70 will be $2,831 and $5,108 per month, respectively.
Updates to Contribution and Benefit Base:The contribution and benefit base for 2025 is set at $176,100, up from $168,600 in 2024. This figure, known as the “Social Security taxable maximum earnings,” affects both Social Security taxes and benefit calculations.
Revised Earnings Limits:Changes to the Social Security earnings test limits in 2025 include exemptions for earned income up to $1,950 per month for those reaching full retirement age after 2025. The rules vary depending on when you hit full retirement age and impact benefit withholding.
Looking Ahead:While these changes reflect adjustments for 2025, more significant reforms may be necessary in the future due to projected deficits in the Social Security system. Stay informed about potential updates if you are nearing Social Security age.
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