COLA Update: Social Security Implements 2 Significant Changes Impacting Retirees

According to Lagradaonline, This week marks a pivotal moment for retirees as the Social Security Administration (SSA) prepares to announce the cost-of-living adjustment (COLA) for 2025. After much anticipation, the announcement is imminent, although a slight delay has occurred due to the need for final inflation data from September, which will be available on October 10. Retirees will soon learn about their benefit increases for the upcoming year.

Key Updates to Be Released on October 10

In addition to the COLA announcement, the SSA will share other critical updates for 2025 that impact working retirees and individuals contributing to Social Security. Two areas that are particularly important for retirees and those approaching retirement age are the 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 still receiving benefits. However, there are limits on earnings for those who have not yet reached their full retirement age. Exceeding these limits can result in some benefits being withheld.

Current Earnings-Test Limits:

• • For 2024, the earnings-test limit is set at $22,320. If you earn above this amount before reaching full retirement age, some benefits may be withheld.
  • For individuals turning full retirement age during 2024, the limit is higher at $59,520.

These limits are expected to increase in 2025, allowing retirees to earn more without penalties. It’s essential to remember that any benefits withheld due to exceeding the earnings limit are not permanently lost; the SSA will return these amounts once the individual reaches full retirement age. While this is good news for long-term financial health, it may not be as beneficial for those relying on these benefits in the short term.

Changes to the Social Security Wage Cap

The wage cap is another crucial factor that will be updated in 2025. It affects both workers and the overall Social Security system. Social Security taxes apply only to earnings up to a certain limit; for 2024, this cap is set at $168,600. Earnings above this threshold are not subject to Social Security taxes.

Also read: Full Retirement Age Workers: Maximum Social Security Benefits After 2025 COLA

This wage cap is likely to increase in 2025 in response to inflation and wage growth trends. While it may seem relevant only to workers, it significantly impacts the long-term sustainability of the Social Security program. With potential revenue shortfalls looming, raising the wage cap could help secure additional funds for the system, potentially preventing benefit cuts in the future.

Stay Informed About SSA Updates

As the COLA announcement approaches, it is essential to keep an eye on these additional updates from the SSA. The earnings-test limits and wage cap changes can significantly influence retirees’ earnings potential and the financial health of the Social Security system.

Given the importance of these updates, it’s advisable to check the SSA’s website on October 10 to understand how these changes might impact you. Whether you are a current retiree or still in the workforce, staying informed about Social Security changes is vital for ensuring your financial well-being in the years ahead.