Social Security has existed for many years, but its regulations can undergo modifications. This adaptability is essential.

To keep pace with inflation, Social Security must be able to adapt in different ways. In 2025, several major changes are on the horizon that could affect both retirees and workers. Here’s what you should be aware of moving forward.

1. Cost-of-living adjustment

Social Security benefits receive automatic cost-of-living adjustments (COLAs). The aim of these COLAs is to enable recipients to preserve their purchasing power as living costs rise due to inflation.

Social Security benefits increased by 3.2% at the beginning of 2024. However, the COLA for the next year is predicted to be lower, with early estimates suggesting it could be around 2.63%. This estimate may change depending on inflation trends in the third quarter of the year.

Individuals receiving Social Security should be prepared for a reduced COLA in 2025. This may necessitate budget adjustments or exploring additional income opportunities through gig jobs.

2. Increased earnings-test limit

Seniors receiving Social Security benefits can also earn income from employment. However, for those who have not yet reached full retirement age, it’s important to note the earnings limits. Exceeding these limits can lead to a portion of Social Security benefits being withheld (these withheld benefits are reimbursed upon reaching full retirement age).

The earnings limit for 2024 is set at $22,320. However, if you will reach full retirement age by the close of the year but have not yet done so, that limit is significantly higher at $59,520.

In 2025, the earnings-test limit is expected to rise, allowing you to earn more without negatively influencing your Social Security benefits. If you have been considering increasing your gig work or part-time job hours, it might be wise to wait until January to do so.

3. Increased wage cap

Payroll tax revenue funds Social Security. However, not all wages are subject to Social Security taxes.

Each year, a wage cap is established to specify how much earnings are taxable under Social Security. Currently, this cap is set at $168,600 but is expected to rise in 2025.

If you don’t anticipate earning more than $168,600 in 2025, this change won’t affect you. However, if you are a higher earner, now might be a good time to consult a tax professional to develop strategies to minimize your overall tax liability. If you’re already doing everything possible in this regard, plan for the possibility that you might notice a larger portion of your paycheck going to Social Security taxes in the coming year.

4. Elevated earnings threshold for work credits

To qualify for Social Security benefits in retirement, you generally need to earn a certain amount of money and pay taxes on that income over your career. Although there are ways to receive Social Security without working—such as spousal benefits—if this isn’t an option for you, it is vital to ensure your earnings qualify when you retire.

To be eligible, you must accumulate 40 work credits throughout your life, and you can earn a maximum of four credits each year.

Currently, a work credit is valued at $1,730. However, in 2025, it is likely that the required earnings for a single credit will increase. So, if you’re working part-time and aiming to qualify for Social Security, keep an eye on what the new earnings requirement will be. You might need to boost your hours to earn those four credits in the upcoming year.

The changes to Social Security next year will impact not just retirees but also many workers. Therefore, staying informed about Social Security developments is crucial for making the necessary adjustments.

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