This is the next big change coming to Social Security – It will affect seniors

Amelia Ross
4 Min Read

Social Security is a key program in the United States that helps many people, especially as they get older. It has been around since 1935, thanks to President Franklin D. Roosevelt. The program has changed a lot over the years to keep up with new challenges and needs. In 2024, there were some important changes to Social Security that everyone should know about because they can affect your finances in big ways. Let’s take a look at these changes.

Potential Reduction in Next Year’s Cost of Living Adjustment

At the start of 2024, Social Security benefits went up by 3.2%. This increase was smaller than the previous year’s, but it was meant to help seniors keep up with rising prices. However, the economy hasn’t improved as much as expected. In 2025, Social Security benefits might not go up as much. The early guess is a 2.66% increase based on 2024 inflation data. But this could change since final adjustments are based on data from the third quarter of the year.

Increase in the Wage Cap for Social Security Taxes

Social Security gets most of its money from payroll taxes. There’s a limit on how much of your income is taxed for Social Security. In 2024, this limit, or wage cap, went up to $168,600 from $160,200. It might go up again next year. Some lawmakers want to increase this cap even more to help Social Security. President Biden has suggested taxing income over $400,000 to improve Social Security for future retirees. It’s not clear if this will happen, but it could mean higher benefits for people who pay more into the system.

Stricter Qualification Criteria for Social Security

To get Social Security when you retire, you need to earn 40 work credits over your life, with a maximum of four credits per year. This means you need to work at least 10 years. In 2024, the value of a work credit went up to $1,730 from $1,640. While this makes qualifying a bit harder, it helps keep Social Security funded by making sure people contribute enough in taxes.

Social Security will keep changing in 2025 and beyond to meet new challenges. Staying informed about these changes is important because they can impact your retirement plans and finances. If you’re still working, knowing about these changes can help you plan better for your retirement. If you’re already retired, it can help you adjust your financial plans to better handle these changes.

FAQs

1. What is Social Security?

Social Security is a federal program that provides financial assistance to retirees, disabled individuals, and families of deceased workers.

2. How often does Social Security change?

Social Security changes periodically to adapt to economic conditions and societal needs. Significant updates usually occur annually.

3. What is the Cost of Living Adjustment (COLA)?

COLA is an annual adjustment to Social Security benefits to help recipients keep up with inflation.

4. How is the wage cap determined?

The wage cap is the maximum income subject to Social Security taxes. It’s adjusted annually based on national wage trends.

5. How do work credits affect eligibility?

You need 40 work credits to qualify for Social Security. These credits are earned through your work history and contributions to Social Security taxes.

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