Each year, the Social Security Administration (SSA) announces critical updates that impact millions of Americans. Whether you’re already receiving benefits or planning to in the near future, these changes can shape your financial outlook. While many look forward to fall activities in October, there’s another reason to mark your calendar.
On October 10, the SSA will reveal several important updates to the Social Security program. Here’s a sneak peek at the three most anticipated changes, which could affect both retirees and working Americans alike.
Earnings
If you’re collecting Social Security benefits but still working, you should pay close attention to the SSA’s updates. In 2025, the earnings test threshold will increase, meaning retirees can earn more money without losing a portion of their Social Security benefits.
Currently, if you are under full retirement age and continue working while collecting benefits, there’s a cap on how much you can earn without penalty. For 2024, that cap is $22,320. If you earn over this amount, the SSA may withhold some of your benefits. For those nearing full retirement age, the limit rises to $59,520. However, once you reach full retirement age, there’s no limit on how much you can earn, and any withheld benefits will be returned.
With inflation expected to push these thresholds higher in 2025, it’s crucial to understand how much more you can earn without reducing your Social Security income. This can provide added flexibility for those who wish to supplement their retirement income.
| Age Group | 2024 Earnings Test Limit | Expected 2025 Increase |
|---|---|---|
| Under Full Retirement Age | $22,320 | Higher (due to inflation) |
| Near Full Retirement Age | $59,520 | Higher (due to inflation) |
Wage Cap
For workers paying into Social Security, there’s good news on the horizon. Social Security contributions are funded through payroll taxes, but not all income is subject to these taxes. The wage cap limits how much of your earnings are taxed for Social Security, and this cap will increase in 2025 to account for inflation and wage growth.
In 2024, workers pay Social Security taxes on earnings up to $168,600. Earnings above this amount are exempt from Social Security taxes. With wage growth and inflation, this cap is expected to increase next year. Higher earners, though, should be prepared to see more of their income subject to Social Security taxes as the cap rises.
Consulting with a tax professional may help mitigate the impact, but keep an eye on how this change could affect your overall tax liability. Whether you’re a high earner or nearing retirement, these adjustments could have significant implications for your finances.
COLA
Perhaps the most eagerly awaited update each year is the Cost-of-Living Adjustment (COLA). COLA increases Social Security benefits to keep up with inflation, ensuring that retirees maintain their purchasing power. However, the projected COLA for 2025 might be lower than many expect.
Based on current inflation data, the Senior Citizens League estimates that the 2025 COLA will hover around 2.5%. This is lower than in recent years, reflecting reduced inflationary pressures. While this may seem modest, it’s important to remember that the exact figure could fluctuate depending on the inflation trends for the rest of the year.
However, one thing to keep in mind is that Social Security beneficiaries who are also on Medicare may see their COLA effectively canceled out by higher Medicare Part B premiums. If the Medicare premium increases sharply, it could reduce the net impact of your Social Security benefit increase. So while the SSA will announce the official COLA in October, the full picture won’t be clear until Medicare releases its 2025 premiums.
What to Expect Next
These changes represent only a snapshot of what’s coming in 2025. The SSA will continue to adjust limits, benefits, and taxes to reflect economic conditions. Whether you’re working or retired, it’s essential to stay informed about how these changes affect your financial well-being. Be sure to check the official SSA website on October 10 to get the full details.
If you’re nearing retirement, knowing how these updates impact your earnings and benefits will help you make smarter decisions. For those still contributing to Social Security, knowing the new wage cap ensures you’re prepared for any changes to your payroll taxes. And for everyone, the COLA adjustment will determine how much your benefits will grow in the coming year.
No matter where you stand, these updates are vital to your financial future. Keep them in mind as you plan your next steps toward a secure retirement.
FAQs
Will Social Security benefits increase in 2025?
Yes, but the increase may be lower than expected due to modest COLA.
How much can I earn while on Social Security in 2025?
The earnings test threshold will increase, allowing higher earnings.
What is the Social Security wage cap for 2025?
The wage cap will rise above $168,600, reflecting inflation and wage growth.
Yes, Medicare Part B premiums could reduce your benefit increase.
When will these Social Security changes be announced?
The SSA will announce them on October 10, 2024.
