Social Security Reveals 2 Major Changes Post-COLA: What Retirees Need to Know
According to Lagradaonline, This week marks a pivotal moment for retirees as the Social Security Administration (SSA) prepares to announce the cost-of-living adjustment (COLA) for 2025. After much anticipation, the announcement is imminent, but the delay is due to the need for final inflation data from September. This essential data will not be available until October 10, so retirees will need to wait just a little longer to learn about their benefit increases for the coming year.
October 10: A Day of Important Updates
In addition to the COLA announcement, October 10 will bring other crucial updates for 2025, including changes that impact working retirees and those paying into Social Security. Two specific areas of particular interest for retirees and those nearing retirement are the earnings-test limits and the wage cap for Social Security taxes.
Earnings-Test Limits for 2025
One of the significant advantages of Social Security is that it allows beneficiaries to work and earn income while receiving benefits. However, if you have not yet reached your full retirement age, there are limits on how much you can earn before it affects your Social Security payments. For 2024, the earnings-test limit is set at $22,320. This means if your earnings exceed this amount before reaching full retirement age, some of your benefits may be withheld.
For individuals who will reach full retirement age during 2024, the earnings-test limit is higher at $59,520. Expectations are that these limits will increase in 2025, allowing retirees to earn a bit more without facing a reduction in benefits.
It’s essential to understand that any benefits withheld due to exceeding the earnings limit are not permanently lost; the SSA will return these amounts once you reach your full retirement age. While this is good news for your long-term financial outlook, it may not provide immediate relief if you are depending on those benefits in the short term.
The 2025 Social Security Wage Cap
Another critical factor that will see updates in 2025 is the wage cap, which impacts both workers and the overall Social Security system. Social Security taxes are not applied to all of a worker’s income; instead, a wage cap limits how much of a person’s earnings are subject to these taxes. For 2024, the wage cap is set at $168,600, meaning any earnings above this threshold are exempt from Social Security taxation.
Also read: Maximum Social Security Payment for Full Retirement Age Workers After 2025 COLA
This wage cap is likely to increase in 2025, reflecting trends in inflation and wage growth. While this detail may seem relevant only to workers, it significantly impacts the long-term stability of the Social Security system. The program faces a potential revenue shortfall in the coming decade, which could lead to benefit cuts if new revenue sources are not secured. By increasing the wage cap, more income will be taxed, thus helping to funnel more funds into the system and supporting the program’s sustainability.
Stay Informed
While the COLA announcement will take center stage, it’s crucial to keep an eye on these other updates from the SSA. The earnings-test limits and wage cap are significant factors that can influence how much retirees can earn without penalties and how money flows into the Social Security system overall.
Given the importance of these updates, it’s advisable to check the SSA’s website on October 10 to understand how these changes will impact you. Whether you are a current retiree or still in the workforce, staying informed about Social Security changes is vital for ensuring your financial well-being in the years ahead.
