2 Critical Changes in Social Security After COLA Increase for Retirees

The Social Security Administration (SSA) is set to announce the highly anticipated 2025 cost-of-living adjustment (COLA) on October 10, 2024. This update is expected to affect retirees, workers, and those approaching retirement age. The COLA adjustment will be based on the final inflation data for September, which is essential for an accurate calculation.

Along with the COLA announcement, the SSA will provide updates on key changes impacting Social Security beneficiaries, particularly those who continue working while receiving benefits. These include adjustments to the earnings-test limits and the wage cap for Social Security taxes, which will influence both retirees and workers in 2025.

Earnings-Test Limits for 2025

The Social Security earnings test limits determine how much beneficiaries can earn before their Social Security benefits are reduced. In 2024, the earnings test limit for individuals under full retirement age (FRA) is $22,320. If their earnings exceed this amount, some benefits are withheld. However, for those who will reach FRA in 2024, the earnings limit is higher at $59,520.

The earnings-test limits are expected to increase in 2025, allowing beneficiaries to earn more before facing reductions in their monthly payments. It’s important to note that any benefits withheld due to exceeding the earnings limit aren’t permanently lost. The SSA will adjust your benefit amount once you reach FRA, ensuring the withheld benefits are returned, which provides long-term financial stability.

Also Read – SNAP 2025 COLA Payment Schedule: October Boosts Up to $1,756 – $3,516

The Social Security Wage Cap

In addition to the COLA adjustment and earnings-test limits, the SSA is expected to raise the wage cap in 2025. The wage cap sets the maximum amount of income that is subject to Social Security taxes. For 2024, the wage cap is $168,600, meaning that high earners will only pay Social Security taxes on income up to this amount. Earnings above the cap are not taxed for Social Security purposes.

A potential increase in the wage cap for 2025 is significant as it will raise the amount of income taxed for Social Security, which will help boost the program’s revenue. This adjustment is essential for maintaining the financial health of the Social Security system, as the program faces potential revenue shortfalls in the coming years. By expanding the taxable income base, Social Security’s long-term sustainability is improved, potentially reducing the risk of benefit cuts in the future.

How These Changes Affect Different Groups

For Retirees Continuing to Work:
The increase in the earnings-test limit in 2025 allows retirees to earn more income without facing penalties. This is particularly beneficial for those who may want to continue working and need additional income but still wish to receive their Social Security benefits.

For Workers Approaching Retirement:
Raising the wage cap means higher earners will pay Social Security taxes on more of their income. This could result in slightly higher taxes for these workers but plays a vital role in ensuring the long-term stability of the Social Security program.

For Social Security’s Future:
Increasing the wage cap is a key measure to address Social Security’s financial challenges. While it doesn’t fully resolve the system’s funding issues, it contributes to the program’s sustainability, helping to prevent future cuts to benefits.

Staying Updated

The changes to the COLA, earnings-test limits, and wage cap will be announced on October 10, 2024. It’s essential for beneficiaries, workers, and retirees to stay informed about these updates. The changes could lead to modest increases in Social Security payments or require adjustments in your financial planning.

By understanding how these updates affect you, whether you’re currently receiving benefits, planning to retire soon, or still actively working, you can make more informed financial decisions. These adjustments offer opportunities to maximize your Social Security benefits, while also helping ensure the program remains solvent for future generations.

Also Read – 2025 COLA Boost: CalFresh SNAP Payments in California Starting Next Week

FAQs

When is the 2025 COLA announcement?
The COLA announcement will be made on October 10, 2024.

Will the earnings limit increase in 2025?
Yes, the earnings limits are expected to rise in 2025.

What is the wage cap for Social Security taxes in 2024?
The wage cap is $168,600 in 2024, and it is expected to increase in 2025.

Do withheld benefits get lost forever?
No, any benefits withheld due to exceeding the earnings limit are returned once you reach full retirement age.

How does the wage cap affect future benefits?
Raising the wage cap will increase Social Security’s revenue, contributing to the long-term stability of the program and helping to prevent potential cuts to benefits.