As the Social Security Administration (SSA) prepares to unveil the 2025 Cost of Living Adjustment (COLA), retirees are paying close attention to the upcoming updates. While there has been a slight delay in the official announcement due to the need for the final September inflation data, which will be available on October 10, 2024, several crucial changes beyond COLA are expected. These updates will impact both current retirees and those still contributing to Social Security, making this an important time for financial planning.
Anticipated Social Security Changes in 2025
The 2025 COLA announcement is expected to bring adjustments to the benefits retirees will receive over the next year. However, the October 10 announcement will also include other key updates that will affect a broader range of individuals, including those still employed and contributing to Social Security. Two significant updates to watch are the changes to the earnings-test limits and the wage cap for Social Security taxes. These modifications will play a vital role in shaping the financial landscape for both current and future retirees.
2 New Social Security Changes After COLA
In addition to COLA, there are two critical changes that retirees and workers need to understand. These adjustments will help them plan their finances and manage their income and benefits effectively:
- Earnings-Test Limits for 2025
Retirees who continue to work while receiving benefits should be mindful of the earnings-test limits, which dictate how much they can earn before their benefits are reduced.
- For 2024, the earnings limit is set at $22,320 for individuals under full retirement age. If they earn more than this, part of their benefits may be withheld.
- For those reaching full retirement age in 2024, the earnings-test limit is $59,520.
- Importantly, any benefits withheld due to excess earnings are returned once the individual reaches full retirement age.
- Social Security Wage Cap for 2025
The Social Security wage cap defines the maximum amount of earnings subject to Social Security taxes. This cap is expected to increase in 2025 to reflect inflation and wage growth.
- For 2024, the wage cap is set at $168,600, meaning any income above this limit is not subject to Social Security taxes.
- Raising the wage cap ensures that higher-income earners contribute more, potentially helping the program maintain its funding and reduce the risk of future benefit cuts.
Key Dates for Social Security Changes
Retirees and workers should mark October 10, 2024, on their calendars for the official COLA announcement. Following that, further updates regarding the earnings-test limits and wage cap will be critical for financial planning in 2025.
Why Monitoring Social Security Updates Matters
While the COLA increase is the headline for most retirees, it’s essential to stay updated on the other changes to Social Security. Adjustments to earnings-test limits and the wage cap can significantly impact how much retirees can earn without facing a reduction in benefits, and they also influence the revenue flowing into the Social Security system. By staying informed, both current retirees and those nearing retirement can make better financial decisions for their future.
FAQs
What changes are coming to the earnings-test limits in 2025?
The earnings-test limits will increase in 2025, allowing retirees to earn more before their benefits are reduced.
When will the 2025 COLA be announced?
The 2025 COLA is expected to be announced after October 10, 2024, following the release of final inflation data.
How is the Social Security wage cap changing in 2025?
The Social Security wage cap is expected to increase from the 2024 limit of $168,600 to account for inflation and wage growth.