Social Security Unveils Two New Changes After COLA – Major Changes Coming for Retirees

This week is a significant one for retirees, as the Social Security Administration (SSA) is set to reveal the 2025 cost-of-living adjustment (COLA). After much anticipation, the SSA will make the announcement soon, though there’s been a delay due to the need for September’s final inflation data, which won’t be available until October 10. While the COLA has been the focus of attention, the SSA will also unveil other important updates for 2025, affecting both retirees and current workers.

Let’s look into what these changes mean, particularly focusing on two key areas: the earnings-test limits and the wage cap for Social Security taxes.

Earnings-Test Limits

Social Security allows retirees to continue working and earning income while receiving benefits, but there’s a catch. Before reaching full retirement age, your earnings are subject to limits, and exceeding these limits may result in reduced benefits.

For 2024, the earnings-test limit is set at $22,320. If you earn above this amount before reaching full retirement age, some of your Social Security benefits might be withheld. However, if you’re turning full retirement age in 2024, the limit is higher at $59,520, giving you more flexibility.

So, what about 2025? Expect these limits to increase slightly, allowing retirees to earn a bit more without penalty. It’s important to note, though, that any benefits withheld due to exceeding these limits aren’t lost forever. Once you reach full retirement age, the SSA returns the amounts that were withheld, which is good news for your long-term finances. But if you rely on that income now, it may pose a challenge in the short term.

Year	Regular Earnings-Test Limit	Full Retirement Age Limit
2024	$22,320	$59,520
2025	Expected Increase	Expected Increase

Wage Cap

The wage cap, another important update coming in 2025, plays a crucial role in how much workers pay into Social Security. Essentially, this cap limits how much of a worker’s income is subject to Social Security taxes. For 2024, the wage cap is set at $168,600. This means any earnings above this amount won’t be taxed for Social Security purposes.

Why does this matter? Well, in 2025, this cap is expected to rise, mirroring inflation and wage growth. Though this primarily affects higher-income workers, it plays a vital role in keeping the Social Security system funded. With the system facing potential revenue shortages in the future, raising the wage cap helps bring in more funds, potentially staving off cuts to benefits.

While retirees might think this change is irrelevant to them, it’s crucial for the sustainability of the system they depend on. More revenue means less likelihood of future benefit cuts, making it a key factor to keep an eye on.

Year	Wage Cap
2024	$168,600
2025	Expected Increase

Staying Informed

While the spotlight may be on the 2025 COLA, these updates regarding the earnings-test limits and wage cap deserve attention. They impact not just current retirees but also those still working and paying into the system. With the possibility of higher earnings limits and a rising wage cap, both aspects could influence how much income you can keep and how much money flows into the system. These updates contribute to the overall financial stability of the Social Security system, so it’s essential to stay informed.

To ensure you know how these changes will impact you, be sure to visit the SSA’s website on October 10. Whether you’re already retired or planning for your future, staying on top of Social Security adjustments can help you make better financial decisions in the years ahead.

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