Following the eagerly awaited Cost-of-Living Adjustment (COLA) for 2025, the Social Security Administration (SSA) is expected to announce two major modifications.
These changes directly impact the wage cap for Social Security taxes and the amount that retirees can earn while receiving benefits, making them important for both existing retirees and those who are approaching retirement. What you should know about the impending updates is provided here.
Earnings-Test Limits for 2025
One of Social Security’s most important features is the freedom to work while receiving benefits; yet, for individuals who have not yet reached full retirement age, there is a maximum amount they can earn before their benefits are lowered.
The earnings-test limit in 2024 is $22,320 for people under full retirement age. Earnings over this threshold may result in a temporary withholding of benefits.
If an individual attains full retirement age within the year, the earnings-test ceiling rises to $59,520. For 2025, the Social Security Administration is anticipated to increase these caps, providing retirees with greater freedom to take up part-time employment without forfeiting their benefits.
It’s important to remember that withheld benefits are not lost forever. The Social Security Administration will recalculate and repay the withheld payments once you reach retirement age.
Key Changes to Watch for in 2025
| Change | 2024 Figures | Expected 2025 Changes |
|---|---|---|
| Earnings-Test Limit (Below Full Retirement Age) | $22,320 | Increased Limit |
| Earnings-Test Limit (Reaching Full Retirement Age) | $59,520 | Increased Limit |
| Social Security Wage Cap | $168,600 | Increased Cap (Exact Amount TBD) |
Social Security Wage Cap for 2025
The anticipated rise in the Social Security salary cap, which sets the highest income subject to Social Security taxes, is the second significant adjustment for 2025. This wage threshold is scheduled to rise to $168,600 in 2024, after which any income over that amount will not be liable to Social Security taxes.
This wage cap is expected to increase in 2025 to account for wage growth and inflation. This move is important for maintaining the system’s long-term financial health, even though it predominantly impacts high-income taxpayers and workers who continue to contribute to Social Security.
The boost will put more money into the Social Security trust fund, which is in danger of future revenue deficits that, if left unchecked, might result in benefit reductions.
Retirees and employees alike should stay informed about these two important developments that have been announced. The wage cap increase helps Social Security last longer, while the earnings-test limits increase gives more options.
FAQs
The earnings-test limit is expected to increase, allowing retirees to earn more without losing benefits before full retirement age.
While the 2024 wage cap is $168,600, this is expected to rise in 2025 to reflect inflation and wage trends.
The COLA for 2025 will be announced on October 10, 2024, after the final inflation data is available.
These changes will allow retirees to earn more without penalty and increase the amount of income subject to Social Security taxes for workers.
No, benefits withheld due to exceeding the earnings-test limit are returned once you reach full retirement age.
