Social Security is an essential part of life for many Americans, especially retirees. The government has been trying to figure out how to make sure it remains financially stable for years to come. According to the Social Security Board of Trustees, if no changes are made soon, the Social Security trust fund could run out by 2033. Without action, the money coming in from Social Security taxes will only cover 79% of the benefits retirees are due.
Although the government has not yet made significant changes, 2025 will bring some important adjustments. Whether you’re already retired or still working, these changes could affect you. Here are the three most important changes you need to be aware of:
1. Cost-of-Living Adjustment (COLA)
Each year, Social Security benefits are adjusted for inflation, which helps seniors keep up with rising costs. This adjustment is known as the Cost-of-Living Adjustment (COLA). For 2025, the COLA increase is 2.5%, which was announced in October and will take effect in January.
The COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W tracks the prices of everyday goods and services that people typically buy. Every year, the Social Security Administration looks at how much the CPI-W has changed from one year to the next, and that change determines how much benefits will increase for the following year.
2. Higher Taxes for High Earners
If you’re a high earner, you may notice an increase in the Social Security tax withheld from your paycheck in January 2025. The government puts a cap on how much income is subject to Social Security tax, and this cap changes every year.
For 2025, the earnings limit will be $176,100, up from $168,600 in 2024. This means that if you earn more than the new cap, you’ll see an additional $465 withheld from your paycheck. This comes out to about $17.88 per biweekly paycheck.
3. Changes in Earnings Limits for Social Security Benefits
If you’re still working while receiving Social Security benefits, you need to know about the earnings test. In 2025, the earnings limit is increasing. If you’re under full retirement age, you can earn up to $23,400 before your benefits are reduced. This is up from $22,320 in 2024. Once you hit full retirement age, the limit is higher, allowing you to earn more before your benefits are affected.
If your benefits are reduced because you earn more than the limit, don’t worry! The money isn’t lost. Once you reach full retirement age, the Social Security Administration will adjust your benefits to make up for the payments you missed. For example, if your benefits were reduced by the amount equal to six months of payments, it will be like you delayed claiming your benefits for six months once you reach full retirement age.
This rule can be a disadvantage for people who need Social Security and their job to make ends meet in their mid-60s. However, for others who return to work after claiming benefits and don’t rely on them as much, it can be an opportunity to get more benefits later.
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Archer Bannister is a journalist with 4 years of experience covering hard-hitting stories. Currently working with Mikeandjonpodcast, Archer specializes in delivering timely and in-depth updates on a variety of topics, including crime news, politics, and national issues affecting the USA. His expertise and dedication to delivering accurate, impactful news make him a trusted voice for audiences seeking to stay informed on critical topics.
