As we look ahead to the November 2024 general election, it’s crucial to understand the significant changes coming to Social Security in 2025. Regardless of who takes office, economic shifts and legislative adjustments will potentially impact retirees and working individuals alike. Here are five key changes to Social Security that you need to prepare for:

1. Cost-Of-Living Adjustment (COLA)

One of the most anticipated changes is the Cost-Of-Living Adjustment (COLA). Experts project a modest increase between 2.6 percent and 3.25 percent for 2025. This adjustment is based on lowering inflation rates, which have stabilized around 3 percent recently. While this modest increase will slightly boost average Social Security checks, it won’t completely alleviate the financial strain retirees feel due to rising prices. For instance, a 2.6 percent increase would elevate the average Social Security payment from $1,918.28 to $1,968.15, giving a slight raise of $49.87 starting in January 2025.

2. Full Retirement Age Adjustment

The age at which retirees can claim their full Social Security benefits without facing penalties is increasing. Individuals who turn 66 in 2025 will need to wait until they are 66 years and 10 months old to claim their full benefits. If they opt to start their benefits before full retirement age, they’ll face reductions. This adjustment is part of a gradual shift aimed at aligning benefits with increasing life expectancies.

3. Earning Credits Structure

To qualify for Social Security benefits, you need to earn a certain number of credits. Each year, you can earn up to four credits based on your income. In 2024, each credit is worth $1,730, requiring a total of $6,920 in earnings to accumulate the maximum four credits. These earnings thresholds are subject to increase in 2025, although specific figures will be announced later. The number of credits earned directly impacts your access to various benefits, including Medicare and disability payments.

4. Taxable Income Cap Increase

Brace yourself for a hike in the taxable income cap. In 2024, the cap sits at $168,600, but it will rise sharply in 2025 to an estimated $174,900. This adjustment means higher earners will pay more in Social Security taxes. The final figures will be confirmed later this year, but it’s a certainty that those within higher income brackets should prepare for increased contributions.

5. Delayed Retirement Credits

Retiring later can significantly boost your Social Security benefits due to delayed retirement credits. Each year you delay claiming your benefits past your full retirement age increases your monthly checks by approximately 8 percent. This is an important incentive for those who can afford to wait, ensuring a more generous income stream in their later years.

As we edge closer to the November 2024 election, it’s essential to stay informed about these impending Social Security changes. By understanding and preparing for these adjustments, you can better manage your future finances and make strategic decisions that will benefit your retirement.

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