President Joe Biden is expected. Sign a bill This will increase social security benefits for some pensioners. Additionally, annual social security Cost of living adjustments Effective for all beneficiaries.
And Medicare enrollees who worry about health care costs now have a $2,000 annual out-of-pocket Part D prescription drug cap aimed at helping ease those financial strains. is
Here are some key changes to note for the coming year.
Some pensioners may receive an increase in benefits.
The Senate A bill passed The last legislative session in 2024 is to boost Social Security payments for millions of people who receive pensions from work in federal, state and local government, or in government jobs such as teachers, firefighters and police officers. The House passed the bill in November.
Biden is now expected to sign the bill in the coming days.
Social Security Fairness Act Eliminates two provisions. which reduces Social Security benefits for some individuals who also have pension income from public employment where Social Security payroll taxes were not paid.
This includes the Windfall Elimination Provision, or WEP, which reduces Social Security benefits for individuals who also receive pension or disability benefits from employers withholding Social Security taxes.
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The Senate has approved an increase in Social Security benefits for some public workers.
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It also includes the Government Pension Offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who receive their own government pension.
Together, the rules affect about 2.5 million beneficiaries, according to the Congressional Research Service. Once enacted, the law may provide higher benefit payments to these individuals.
In particular, it may provide for retroactive payments of these benefit increases. Months after December 2023.
Martha Shedden, president of the National Association of Registered Social Security Analysts, said the legislation marks the biggest change in Social Security since some couples’ claiming strategies were phased out in 2016.
“We’re confused about how the process will go, when people will see an increase and how they’ll fall back. [benefits] will be implemented,” Shedden said.
All Social Security beneficiaries will receive a 2.5% COLA.
In 2025, all beneficiaries will see a 2.5% increase in their Social Security benefit checks, thanks to annual cost-of-living adjustments.
Notably, the 2024 growth was 3.2 percent. This year’s COLA is the slowest increase among beneficiaries since a 1.3% increase in 2021, reflecting a slowdown in the pace of inflation.
The change will take effect with the January test for more than 72.5 million Americans, including Supplemental Security Income beneficiaries.
According to the Social Security Administration, the average worker’s retirement benefit will be $1,976 per month, up from $1,927 in 2024.
Monthly Medicare Part B premiums increase.
Monthly Medicare Part B premiums — often deducted directly from Social Security checks — can affect how many beneficiaries receive 2025 benefit payments.
Medicare Part B covers doctor, outpatient hospital and some home health services, as well as durable medical equipment.
In 2025, the standard monthly Part B premium will be $185 per month – an increase of $10.30 from $174.70 in 2024.
The Part B deductible will also increase to $257 in 2025 — a $17 increase from the $240 annual deductible for 2024.
Medicare Part B premiums are based on the beneficiary’s modified adjusted gross income, or MAGI, from their tax returns from two years ago. In 2025, beneficiaries with less than or equal to $106,000 in MAGI in 2023 will pay the standard monthly Part B premium, as will married couples with less than or equal to $212,000.
High-income beneficiaries will be subject to an income-related adjustment amount, or IRMAA, which increases their monthly premium payments.
A Medicare $2,000 prescription drug cap applies.
Annual out-of-pocket Medicare Part D drug costs will now be capped at $2,000, as changes enacted with the Inflation Reduction Act take effect.
Beneficiaries of Medicare Part D drug plans that have a deductible will pay out-of-pocket costs until the limit is met. In 2025, the maximum deductible for these plans is $590.
Once beneficiaries pay their full deductible, they owe 25% of the cost of coinsurance until their out-of-pocket costs for generic and brand-name drugs reach $2,000. After that, those beneficiaries will have what’s called catastrophic coverage, which means they won’t have to pay out-of-pocket Part D costs for the remainder of 2025.
However, the beneficiaries will also have the option of making monthly out-of-pocket payments over the course of the year instead of a lump sum.
Notably, the cost of insulin is also set at $35 per month, both for Medicare Part D covered treatment and for use with a Medicare Part B covered insulin pump.
The Social Security Trust Fund depletion dates are getting closer.
In 2024, Social Security trustees estimated the trust fund the program relies on to help pay retirement benefits could run out in 2033. Right now, only 79% of those benefits could be paid out, provided Congress acts quickly.
Social Security’s joint trust funds — which are used to pay both retirement and disability benefits — are expected to run out in 2035.
Now that the calendar has turned to the new year, those drop dates are closer.
In particular, the previously mentioned Social Security Fairness Act, which would provide increased benefits to some retirees, could push the trust fund depletion date closer to six months.
“That’s the biggest issue right now, what can be done to grow these trust funds,” Shedden said. “This would require very comprehensive, bipartisan changes to several parts of the Social Security rules in the program.”
However, most financial advisors emphasize that personal claims should not influence decisions.
For younger generations, future benefits may change, said George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies in Lexington, Massachusetts.
“But for people who are already receiving or about to receive Social Security checks, I don’t think there’s anything to worry about,” Gagliardi said.
Other important changes to note
- Maximum taxable income — the amount of wages subject to Social Security payroll taxes — will rise to $176,100 in 2025, up from $168,600 in 2024. Once workers reach that threshold, they don’t pay into the program for the rest of the year.
- Social Security beneficiaries who claim benefits before their full retirement age and who continue to work face the retirement income test. Earnings exempt from the retirement income test are now $23,400 per year in 2025, down from full retirement age, from $22,320 per year in 2024. For every $2 in excess income, $1 in benefits is withheld. An upper limit applies to earnings of $62,160 in the year an individual reaches retirement age, up from $59,520 in 2024. For every $3 in excess income, $1 in benefits is withheld. Note: This applies only to the months after the beneficiary reaches full retirement age. From their birthday month, the retirement income test no longer applies. Importantly, once the beneficiary reaches full retirement age, any previously withheld benefits are applied to monthly benefits.
- Do you want to speak to the Social Security Administration face-to-face? Beginning Jan. 6, the agency requires appointments for local office services, such as obtaining Social Security cards. To improve efficiency, the agency is directing people who need help to try its online or automated telephone services first. However, people who are unable to make in-person appointments, especially the vulnerable, can still come in and receive service in person.