• Social Security gets a raise every year due to inflation.
  • You might have to wait longer to collect your full retirement benefit.
  • Some workers will owe more in payroll taxes tied to Social Security.
  • The $22,924 Social Security bonus most retirees completely overlook

Social Security remains a hot political issue, especially as potential benefit cuts loom without reform. While major changes aren’t likely before the end of 2024, some adjustments will kick in automatically next year. These changes are crucial for both retirees and workers, so staying informed is key. Here are three significant Social Security updates coming in January.

  1. A COLA Boost for Recipients
    Social Security benefits are set to increase due to the annual cost-of-living adjustment (COLA). This raise is calculated based on the growth of a specific consumer price index from the third quarter of each year. With inflation slowing, the Senior Citizens League estimates a 2.6% COLA for 2025, which is a more moderate increase compared to recent years. While smaller, this adjustment could better preserve the purchasing power of Social Security benefits.
  2. Full Retirement Age Inches Up
    The full retirement age (FRA) is gradually increasing, impacting when seniors can claim their full Social Security benefits. This change, enacted by Congress in 1983, raises the FRA by two months annually for those born after 1954, reaching 67 for those born in 1960 or later. In 2025, the FRA will be 66 years and 8 months for those born in 1958, and 66 years and 10 months for those born in 1959. Knowing your FRA is essential, as it affects your monthly benefit amount, whether you claim early or delay.
  3. Higher Earners May Pay More in Taxes
    Most workers contribute to Social Security through a 6.2% tax on wages, matched by employers. However, high earners only pay Social Security taxes up to a certain income limit, which adjusts annually based on wage inflation. In 2024, the maximum taxable earnings were $168,600. With a smaller inflation rate, this cap will likely rise modestly in 2025, meaning higher taxes for those earning above the 2024 limit.

These changes, while primarily affecting seniors, also have implications for current workers, making it crucial to keep up with Social Security updates.