Although Social Security has been around for decades, the program's rules tend to evolve with the times. That's a good thing, as changes to Social Security have the potential to benefit retirees tremendously.
That said, not every change that Social Security undergoes is a positive one. Here are three ways the program shifted in 2024 -- for better or for worse.
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1. Benefits got a 3.2% raise
Each year, Social Security benefits are eligible for a cost-of-living adjustment, or COLA. The purpose of COLAs is to help ensure that Social Security beneficiaries are able to maintain their buying power as inflation makes common living costs get more expensive over time.
In 2024, Social Security benefits got a 3.2% COLA. That took the average monthly benefit of $1,848 at the end of 2023 up to $1,907 at the start of 2024.
Next year's Social Security COLA , however, is shaping up to be smaller. It's too soon to have a handle on that number yet, since COLAs are based on third-quarter inflation data. But initial estimates are calling for a 2025 COLA of 2.57%, which is considerably lower than the raise seniors received earlier this year.
However, the good thing about shrinking COLAs is that they're a sign of cooling inflation. So while Social Security benefits may not rise all that much in 2025, retirees can at least benefit in the sense that their expenses shouldn't increase as rapidly as they have in recent years.
2. The earnings-test limit rose
Once you reach full retirement age , you don't have to worry about Social Security's earnings-test limit. It's only when you're working while receiving benefits prior to full retirement age that the earnings-test limit comes into play. Essentially, that limit dictates how much you can earn before you risk having some of your Social Security benefits withheld.
In 2023, the earnings-test limit for seniors under full retirement age was $21,240. This year, it rose to $22,320.
There's a different limit for seniors who haven't reached full retirement age but will be reaching it before the end of the year. In 2023, that higher limit was $56,520. This year, it's $59,520.
Wages beyond the earnings-test limit put seniors at risk of having a portion of their benefits withheld, so it's important to know what the limit looks like. However, withheld benefits are not lost forever. They're added back into seniors' monthly Social Security checks once they reach their full retirement age.
3. The wage cap increased
Higher earners aren't necessarily subject to Social Security taxes on all of their wages. Each year, the amount of wages that are taxed to fund the program is capped at a certain level.
In 2023, the wage cap sat at $160,200. This year, however, it was raised to $168,600. Many Americans won't feel that sting, since they pay Social Security taxes on their entire salary due to it being below the cap. But the Social Security wage cap is also likely to increase in 2025, and that's something higher earners ought to prepare for.
Clearly, a lot has happened with Social Security since the start of 2024. The program is apt to undergo some major changes in 2025 , too. It's important that retirees and workers alike pay attention to Social Security updates so that there are no unpleasant surprises.
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