Personal Finance

Prediction: 3 Massive Ways Social Security Could Change in 2025

Maurie Backman

Published: December 13, 2024 4:46 pm

Although Social Security has been around for decades, it’s common for some of the program’s aspects to change from year to year. For example, seniors on Social Security are eligible for an automatic cost-of-living adjustment, or COLA, and 2025 is no exception. In the new year, benefits will be rising 2.5%.

Key Points from 24/7 Wall St.

• Social Security could get a shakeup under Trump’s administration.
• Taxes on benefits could become a thing of the past.
• Changes to full retirement age could also be in store.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Social Security’s earnings-test limit is also rising in 2025. And the wage cap that dictates how much income gets taxed to fund the program is increasing, too.

These all are guaranteed changes to Social Security in the new year. But under a Trump administration, the program could undergo some additional shifts. Here are a few to keep on your radar.

1. Taxes on benefits could end

Social Security benefits aren’t always subject to taxes, but taxes do apply to many seniors at fairly low income thresholds. As part of his campaign, Trump pledged to end taxes on Social Security benefits for retirees. But whether that actually happens — in 2025 or at all — is up in the air.

The reality is that putting an end to taxes on Social Security benefits would require bipartisan support. Given Social Security’s fiscal challenges, it’s unclear as to whether lawmakers across both parties will be willing to entertain a scenario that strips the program of any key revenue source.

2. Full retirement age could change

Full retirement age is when older Americans can claim their monthly Social Security benefits without a reduction. For those born in 1960 or later, that age is 67.

Some Republicans have proposed pushing back full retirement age to 68 or 69 to help shore up Social Security’s finances. That would effectively force millions of Americans to delay their retirement plans.

Trump may or may not push for an older full retirement age for Social Security. But he’ll need to do something to make up for lost revenue if his idea to end taxes on benefits moves forward. So it’s possible that we could see a shift in full retirement age under his term.

To be clear, it’s unlikely that an official change to full retirement age will take effect in 2025, as lawmakers would need time to phase such a change in. Rather, it’s that they may put the framework for this change in place.

3. The program could get closer to insolvency

If Trump is successful in putting an end to taxes on Social Security benefits, it could drive the program that much closer to having to cut benefits broadly. As it is, the program’s Trustees are projecting that Social Security’s combined trust funds will be out of money by 2035. From there, cuts may be inevitable barring another revenue-generating solution.

It’ll be interesting to see how lawmakers approach Social Security in 2025. On the one hand, the program needs a serious overhaul to avoid benefit cuts down the line. On the other hand, giving seniors access to their benefits without the IRS getting a cut could improve many people’s financial picture. Either way, policymakers will have their work cut out for them as they attempt to strike a balance that protects retirees without putting Social Security at risk.