The expected changes are:

Retirees can expect big changes in 2025 when it comes to their Social Security and Medicare benefits.

President Joe Biden is expected to sign legislation that increases Social Security benefits for certain pensioners. Additionally, an annual Social Security cost of living adjustment applies to all beneficiaries.

And for Medicare enrollees who are worried about their health care costs, part D prescription drug out-of-pocket costs are capped at $2,000 per year to help ease those financial pressures.

Here are some important changes to look out for next year.

In the final days of the 2024 legislative session, the Senate will pass a bill that would increase Social Security payments to millions of people who receive pensions from federal, state, local, or public service jobs such as teachers, firefighters, and police officers. It was approved. The House of Representatives passed the bill in November.

Biden is now expected to sign the bill into law within the next few days.

The Social Security Fairness Act removed two provisions that reduced Social Security benefits for certain individuals who also had pension income from public work for which Social Security payroll taxes were not paid.

This includes a Windfall Exemption Provision (WEP) that reduces Social Security benefits for individuals who also receive pension or disability benefits from an employer that did not withhold Social Security taxes.

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This also includes the Government Pension Offset (GPO), which reduces Social Security benefits for spouses, widows, and widowers who receive a government pension.

In total, the rules would affect about 2.5 million beneficiaries, according to the Congressional Research Service. If enacted, this law could result in higher benefits being paid to these individuals.

In particular, retroactive payments of these benefit increases may be provided for months after December 2023.

Martha Shedden, president of the National Association of Registered Social Security Analysts, said the bill would be the biggest change to Social Security since 2016, when some couples advocated phasing out the strategy.

“We’re kind of at a standstill as to how that process is going to go, when people are going to see that increase, and how the retroactive (benefits) are going to be applied,” Shedden said. .

In 2025, the annual cost-of-living adjustment will increase Social Security benefit checks for all beneficiaries by 2.5%.

Notably, the growth rate in 2024 was 3.2%. This year’s COLA was the lowest increase since the 1.3% increase beneficiaries experienced in 2021, reflecting the slowing pace of inflation.

The change will go into effect starting with January checks for more than 72.5 million Americans, including Supplemental Security Income beneficiaries.

The average retirement benefit for workers will be $1,976 per month, up from $1,927 in 2024, according to the Social Security Administration.

Monthly Medicare Part B premiums are often deducted directly from Social Security checks, but they can affect how much of an increase beneficiaries see in their benefit payments in 2025.

Medicare Part B includes durable medical equipment as well as doctors, outpatient hospitals, and certain home health services.

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, an increase of $17 from the $240 annual deductible in 2024.

Medicare Part B premiums are based on the beneficiary’s modified adjusted gross income (MAGI) based on two years’ prior tax returns. In 2025, beneficiaries with a MAGI of $106,000 or less in 2023 will pay the standard monthly Part B premium, as will couples with a MAGI of $212,000 or less.

Higher-income beneficiaries are subject to an income-related adjustment amount (IRMAA) that increases their monthly premium payments.

With changes to the Inflation Control Act going into effect, out-of-pocket costs for Medicare Part D drugs will be capped at $2,000 per year.

Beneficiaries of Medicare Part D drug plans that have a deductible pay out-of-pocket costs until they reach that threshold. In 2025, the maximum deductible for these plans will be $590.

Once a beneficiary pays the full deductible, they will pay 25% of coinsurance costs until their out-of-pocket costs for both generic and brand-name drugs reach $2,000. Those beneficiaries will then receive so-called catastrophic coverage, meaning they won’t have to pay any Part D copayments for the remainder of 2025.

However, beneficiaries also have the option of paying their out-of-pocket costs monthly throughout the year, rather than paying them in full at once.

Notably, the cost of insulin is also capped at $35 per month for both Medicare Part D covered treatments and Medicare Part B covered insulin used in pumps.

In 2024, the Social Security Board predicted that the trust funds the program relies on to help pay for retirement benefits could be depleted in 2033. At that point, only 79% of those benefits could be paid out unless Congress acts sooner.

Social Security’s general trust fund, which is used to pay retirement and disability benefits, is projected to be depleted in 2035.

The calendar has turned into a new year, and the day of depletion is approaching.

In particular, the aforementioned Social Security Fairness Act, which provides increased benefits to some pensioners, could accelerate the depletion date of the trust fund by six months.

“That’s the big pressing question right now is what can we do to strengthen these trust funds,” Shedden said. “That would require very comprehensive, bipartisan changes to multiple parts of Social Security regulations within the program.”

However, most financial advisors stress that it should not influence an individual’s billing decisions.

George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies in Lexington, Mass., said future benefits could change for younger generations.

“But for people who have already received their Social Security check or are about to receive it, I don’t think they have anything to worry about,” Gagliardi said.

The taxable income limit (the amount of wages subject to Social Security payroll taxes) will increase from $168,600 in 2024 to $176,100 in 2025. Once a worker reaches that cap, they can no longer pay into the program for the rest of the year. Recipients who claim benefits before reaching Social Security retirement age and continue to work face what is called a retirement income test. Income exempt from the retirement income test went from $22,320 per year in 2024 to $23,400 per year in 2025 for those below full retirement age. For every $2 of income above the limit, $1 of benefits will be deducted. In the year an individual reaches retirement age, a higher income threshold of $62,160 applies, up from $59,520 in 2024. A benefit of $1 is deducted for every $3 of income over the limit. Note: This only applies in the months before the beneficiary reaches full retirement age. The retirement benefit test no longer applies from your birth month. Importantly, once the beneficiary reaches retirement age, the previously deducted benefit is applied to the monthly benefit. Want to talk directly with the Social Security Administration? Starting January 6, the agency is requiring appointments for local office services, such as obtaining a Social Security card. To increase efficiency, the agency is directing individuals in need of assistance to try online or automated telephone services first. However, people who are unable to make an in-person appointment, especially those who are vulnerable, can still come in and receive in-person services.