According to The Motley Fool, Nearly 68 million Americans will receive a Social Security check in 2024, and for many, these payments are crucial for their financial stability. Staying informed about the latest updates to the program is essential, as some adjustments can significantly impact your monthly benefits.
1. Announcement of the 2025 COLA
On October 10, the Social Security Administration (SSA) will announce the cost-of-living adjustment (COLA) for 2025. The COLA helps beneficiaries maintain their purchasing power over time by adjusting their payments to keep up with inflation. In 2024, the COLA was set at 3.2%, providing recipients with an increase starting in January.
The forecast for 2025 suggests that the COLA will be smaller, with The Senior Citizens League predicting an adjustment of approximately 2.5%, based on current inflation data from the Bureau of Labor Statistics. However, the exact figure will be confirmed during the SSA’s official announcement.
2. Impact of Medicare Premiums on Benefits
While the COLA increase may sound promising, it’s important to consider the changes in Medicare premiums, which are deducted from Social Security payments. Higher premiums can diminish the overall benefit, even if the COLA is higher than expected.
For example, in 2024, the standard Medicare Part B premium is $174.70 per month for individuals earning $103,000 or less annually (or $206,000 for married couples filing jointly). This represents a $9.80 increase from the previous year’s premium of $164.90.
For a beneficiary receiving $2,000 per month from Social Security, a 2.5% COLA would result in an additional $50. However, if Medicare premiums rise by around $10, it would significantly reduce the net gain from the COLA.
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3. Expected Increase in Earnings Test Limits
For those who continue to work while receiving Social Security benefits, the earnings test could also change. This test sets income limits that determine if benefits are withheld based on earnings.
Currently, if you are under full retirement age, your benefits are reduced by $1 for every $2 earned over $22,320 per year. For those reaching full retirement age, the reduction is $1 for every $3 earned over $59,520 per year.
| Income Limits: 2023 | Income Limits: 2024 | Benefit Reductions | |
|---|---|---|---|
| If you're under full retirement age | $21,240 per year | $22,320 per year | $1 for every $2 over the limit |
| If you'll reach full retirement age this year | $56,520 per year | $59,520 per year | $1 for every $3 over the limit |
These limits typically increase each year to account for inflation, so beneficiaries can likely expect higher income caps in 2025. This adjustment can be beneficial for working recipients, allowing them to earn more without facing reductions in benefits.
Preparing for Major Changes Ahead
October is a pivotal month for Social Security, with significant changes anticipated for 2025. By staying informed about these upcoming announcements, beneficiaries can better prepare for the year ahead and make informed financial decisions.
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