Whether you're collecting benefits now or not, it's time to prepare.
The Social Security Act was signed into law in August of 1935. Regular ongoing monthly benefits started going out in early 1940.
Since then, Social Security has served as a steady source of retirement income for millions of older Americans. But even though the program has been around for more than 80 years, its rules can change on an annual basis.
In fact, even though the Social Security Administration has not yet announced any official changes for 2025, there's reason to believe a shake-up is right around the corner. Here are three changes that are likely to arrive in January that everyone should be preparing for now.
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1. Social Security benefits will get a boost, but it won't be nearly the largest on record
Each year, Social Security benefits are eligible for an automatic cost-of-living adjustment, or COLA. COLAs are meant to help recipients maintain their buying power as inflation drives the cost of living higher.
Many seniors get most or all of their income from Social Security. Without COLAs, they would quickly fall behind and struggle.
In 2024, Social Security recipients saw their benefits rise by 3.2%. But 2025's COLA is shaping up to be a bit lower.
Current estimates are putting next year's COLA at 2.63%. That number has the potential to wiggle between now and October, when it gets officially calculated based on third-quarter inflation data.
But either way, 2025's Social Security COLA won't be groundbreaking. Let's hope that it's just high enough to make it possible for seniors to keep up with their expenses.
Seniors who are looking for a more substantial boost to their monthly income may need to turn to part-time work to make that happen. Fortunately, it's possible to earn an income from a job while collecting Social Security -- and there may be a big change there, too.
2. The earnings-test limits should rise
Working while receiving Social Security isn't a problem. And once you reach full retirement age, which is the age when you're entitled to your complete monthly benefit based on your personal wage history, you can earn any amount of money without having any of your Social Security income withheld.
But if you're working while on Social Security and you haven't yet reached full retirement age, you'll be subject to an earnings-test limit. If you exceed that limit, you'll have some of your Social Security income withheld, though it won't be lost forever. Rather, it'll be added back into your benefits once you do reach full retirement age.
In 2024, the Social Security earnings-test limit is $22,320 for seniors under full retirement age who also won't be reaching that age this year. For those who will reach their full retirement age before the end of 2024 but aren't there yet, that limit rises to $59,520.
Next year, the Social Security earnings-test limit is likely to rise in line with inflation and wage growth. So if you're a 64-year-old collecting benefits and want to boost your income, you should pay attention to next year's numbers to see how much you can earn without having part of your benefit payments withheld.
3. Higher earners will have to pay more into Social Security
Social Security gets the bulk of its funding from payroll taxes. But each year, there's a wage cap put in place that determines how much income is subject to Social Security taxes.
This year, the wage cap is $168,600. This means that someone earning $168,600 and someone earning $500,000 pay the same amount of Social Security tax (though if some lawmakers have their way, that rule could eventually change).
But just as the earnings-test limit is likely to rise in 2025, so too is the wage cap. We don't know the exact extent to which it will go up, but higher earners should expect to lose more of their income to Social Security taxes either way.
If that's problematic, now's the time to sit down with a financial professional and strategize. There are plenty of perfectly legal steps you can take to lower your taxable income.
All told, Social Security is likely to change quite a bit once the new year arrives, so be on the lookout for an official announcement in October. From there, we should learn what 2025's COLA, earnings-test limit, and wage cap will amount to.
