Social Security benefits will change starting Jan. 1 – 4 changes that will affect retirees’ paychecks

The Social Security Administration has made some significant modifications that will impact Social Security payouts for the upcoming year as the year comes to a close. Despite being in place for over a century, Social Security’s regulations are subject to revision.

In fact, the upcoming year will see numerous significant changes to Social Security. Additionally, not all retirees who currently receive Social Security benefits will be impacted by those changes. Even if you are not close to retirement, they may still affect you. You ought to be aware of these upcoming events in 2025.

Important changes that will impact Social Security benefits in less than 2 months

Earnings-test limits for getting Social Security benefits will rise

Seniors who receive Social Security are permitted to work and receive compensation for it. Additionally, you can work for any amount of money without having a percentage of your monthly Social Security payments deducted after you reach full retirement age, which is 67 if you were born in 1960 or later.

However, you must ensure that your income does not exceed the earnings test limit if you work and receive benefits prior to reaching full retirement age. The highest sum of money that would not be eligible for Social Security in 2024 was $22,320. It will be $23,400 in 2025. For every $2 that exceeds that cap, your Social Security income will decrease by $1.

Additionally, you will receive a significantly greater level of income if you are not yet at full retirement age at the beginning of 2025 but will be at any time during that year. Then, it is $62,160, which is higher than the $59,520 for 2024. After that, for every $3 you earn beyond that threshold, $1 will be deducted from your Social Security.

It’s also critical to understand that benefits that are taken away are not permanently lost. You will initially receive smaller monthly checks in 2025 if your earnings exceed the earnings-test limit. When you reach full retirement age, however, your payments should increase after you receive the benefits that were withheld.

Social Security benefits will increase thanks to COLA

Social Security payouts are adjusted annually to account for the cost of living. COLAs are designed to help people maintain their purchasing power in the face of rising living expenses brought on by inflation.

Social Security benefits will increase by 2.5 percent in 2025. In a long time, no cost of living adjustment (COLA) has been as little as this one.

However, there is some positive news. Seniors might profit from cheaper food, petrol, utilities, and other expenses when inflation slows, but they might miss out on a larger Social Security boost.

Increases in Social Security s wage cap

Paying Social Security taxes on your entire paycheck is not required. The amount of income that is taxed annually to fund the program is determined by a wage cap. In 2024, you might make up to $168,600. It is $176,100 in 2025. That means you won’t have to pay taxes on the final $23,900 of your income for Social Security if you earn $200,000 year.

Individuals earning $176,100 annually will be required to pay the same amount of Social Security tax as those earning millions. Some lawmakers believe the wage cap is unfair and are attempting to reform or eliminate it. However, it’s difficult since the maximum amount of money you can receive from Social Security each month is correlated with the maximum amount of taxable income you can receive.

The earnings threshold for work credits under Social Security will be raised

You must accrue 40 labor credits during your lifetime, or up to four credits annually, in order to qualify for Social Security as a retiree. The value of a work credit increased from $1,730 in 2024 to $1,810 in 2025.

You must earn at least $7,240 every month in order to receive your four labor credits for the year. Most of the time, full-time employees won’t be impacted by this adjustment. However, it’s crucial to keep in mind whether you work as a gig worker or part-time employee.

You may be impacted by at least one of these changes in 2025, so it’s critical to keep up with Social Security news. Also, because you ll be taxed on a larger portion of your wages for Social Security, you might want to find ways to lower your taxes if you, say, make more money.

If you are retired, it is also helpful to know how much money you can make in the new year before your Social Security benefits change.

See Also: Are you already getting 2024 SNAP benefits? However, what about WIC?

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