Social Security announces 2 more changes after the COLA – Everything is going to change for retirees
According to Lagradaonline, This week marks a significant moment for retirees as the Social Security Administration (SSA) prepares to unveil the cost-of-living adjustment (COLA) for 2025. After much anticipation, the SSA is set to make the announcement, but the delay has a clear reason: the administration requires the final inflation data from September to calculate the adjustment. Since this data will not be available until October 10, retirees will need to wait just a little longer before learning about their increase for the coming year.
Important Updates on October 10
October 10 is not solely about the COLA; the SSA will also release other critical updates for 2025, particularly those affecting working retirees and individuals contributing to Social Security. Two specific areas are particularly relevant for retirees and those nearing retirement: earnings-test limits and the wage cap for Social Security taxes.
Earnings-Test Limits for 2025
One of the advantages of Social Security is that it allows beneficiaries to work and earn income while receiving benefits. However, before reaching full retirement age, there are limits on how much one can earn before it starts affecting Social Security payments. If you collect benefits but have not yet reached full retirement age, you may have some of your benefits withheld if your earnings exceed a specific threshold.
For 2024, the earnings-test limit is set at $22,320. This means that if you earn above 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. It is anticipated that in 2025, these limits will increase, allowing retirees to earn a bit more without facing a reduction in benefits.
It’s important to note that any benefits withheld due to exceeding the earnings limit are not permanently lost. The SSA returns these amounts once you reach full retirement age. While this is positive for your long-term financial outlook, it may not provide immediate assistance if you are relying on those benefits in the short term.
The 2025 Social Security Wage Cap
The wage cap is another essential factor that will be updated in 2025, impacting both workers and the broader Social Security system. Social Security taxes do not apply to all of a worker’s income; instead, a wage cap limits how much of an individual’s earnings are subject to these taxes. For 2024, the wage cap is set at $168,600, meaning that any earnings above this threshold are not taxed for Social Security purposes.
This wage cap is likely to rise in 2025, reflecting trends in inflation and wage growth. While this detail may seem relevant only to workers, it plays a critical role in the long-term stability of the Social Security system. The program is facing a potential revenue shortfall in the coming decade, which could result in benefit cuts if additional revenue sources are not secured. Increasing the wage cap means more income is taxed, which helps funnel more money into the system. This is a crucial piece in ensuring the future sustainability of Social Security and potentially averting cuts to benefits down the line.
Stay Informed About Social Security Changes
While the focus is primarily on the COLA announcement, it is essential 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 penalty and how much money flows into the Social Security system overall.
Given the importance of these updates, it is advisable to check the SSA’s website on October 10 to understand how these changes will affect you. Whether you are a current retiree or someone still in the workforce, staying informed about Social Security changes is crucial for ensuring your financial well-being in the years ahead.
