Three aspects of Social Security that might astonish numerous retirees by remaining unaltered in 2025:
Three aspects of Social Security that might astonish numerous retirees by remaining unaltered in 2025:
Social Security is a significant aspect of the budget for many retirees. Around sixty percent of retirees consider their monthly checks as a major source of income, while another thirty percent view it as a minor contributor, as revealed in this year's edition of an annual Gallup survey. Every year, there are numerous changes to this program.
Two notable adjustments include the annual Cost-of-Living Adjustment (COLAs) and inflation-related modifications, as well as new earnings test limits that could influence the amount retirees receive monthly. Despite the numerous changes each year, several aspects remain unaltered. And despite their consistency, many retirees might be taken aback by some of these elements.
Here are three things about Social Security that will remain surprisingly consistent in 2025.
1. Taxation of Social Security income
Congress enacted reforms in the 1980s and 1990s, which made some Social Security benefits taxable if a person's income surpasses a specific amount. However, these amounts have not been adjusted for inflation since.
Social Security uses a metric called "combined income" to determine if any percentage of your Social Security benefits are taxable. Combined income is the sum of half of your Social Security benefit, your "adjusted gross income," and any non-taxable interest income. Up to 85% of your Social Security benefit becomes taxable at specific combined income thresholds based on the following table.
| Taxable Percentage of Social Security | Combined Income (Individual) | Combined Income (Joint Filing) || --- | --- | --- || 0% | Less than $25,000 | Less than $32,000 || Up to 50% | Between $25,000 and $34,000 | Between $32,000 and $44,000 || Up to 85% | More than $34,000 | More than $44,000 |
0%
These thresholds are remarkably low. The average Social Security retirement benefit in November was $1,925 per month, or $23,100 per year. A 2.5% COLA increase will be given to monthly checks next year. Even a minor withdrawal from a retirement account for a couple could move some of their Social Security income into the taxable territory.
Less than $25,000
2. Adjustments to your earnings record (for those over 60)
Less than $32,000
When the Social Security Administration calculates your benefit, it adjusts your past earnings for inflation. This means the earnings from your 20s and 30s are equal to your earnings in your 50s.
However, the adjustment for earnings stops the year you turn 60. At this point, your past adjusted-earnings record becomes frozen in terms of inflation. Any earnings in the year you turn 60 or later are not adjusted for inflation at all.
Up to 50%
Working in your 60s could encourage more people since their salary is likely to keep up with inflation. Working in your 60s could significantly boost your ultimate Social Security check, especially considering that many people have more earning power later in their career than in their early days.
Between $25,000 and $34,000
Unfortunately, this means that anyone who was forced to retire early will not receive any inflation adjustments for their earnings once they reach 60. This can lead to relatively meager Social Security checks.
Between $32,000 and $44,000
Although the COLA will still provide a boost to their benefit (whether they have already claimed it or not), they will not receive the additional benefit of earnings adjustments that people who continue to work benefit from natural wage increases. If you are considering retirement, make sure to check your Social Security earnings history to see if your benefit will meet your needs, as it is unlikely to change if you are already over 60.
3. Your full retirement age (FRA)
Up to 85%
Full Retirement Age (FRA) is the age at which you can receive your full retirement benefit. You can claim anytime from the age of 62, but if you claim before reaching your FRA, you will receive less than your full benefit.
More than $34,000
You may come across news articles stating that the FRA is changing, but here's the truth: Your individual FRA has been set since 1983.
More than $44,000
The Social Security program is currently going through a transition period due to a law passed more than 40 years ago. The age at which FRA is reached in a given year is gradually increasing since 2020. For most of 2025, people will reach it at 66 years and 8 months. However, some people will reach it at 66 years and 10 months at the end of 2025.
Here's what's happening: The 1983 Social Security reform bill increased the full retirement age from 65 to 67. Anyone born before 1938 still reached FRA at 65. Those born between 1938 and 1943 reached FRA between 65 and 66 in the mid-2000s. Now, we are going through a similar transition for those born between 1955 and 1960.
Those born between 1943 and 1954 reached FRA at 66. Your FRA increases by 2 months for every year you were born after 1954, up to a maximum of 67 for those born in 1960 or later.
Understanding your FRA is crucial when deciding when to claim Social Security. So it's important to know that it's not changing every year. If you are already in your 60s, it is unlikely that any future changes to the program will affect your full retirement age.
Despite the consistent taxation of Social Security income, wherein up to 85% becomes taxable at specific thresholds, many retirees might find these thresholds surprisingly low, potentially making some Social Security income taxable despite minor income withdrawals from retirement accounts.
Regarding retirement finances, it's worth noting that the full retirement age (FRA) remains unaltered for most individuals, offering a clear indicator for when to claim Social Security benefits, although it gradually increases for those born after 1954, with no significant changes expected in the near future for those already in their 60s.