SSA Earning Limits Updates: In 2025, there will be significant changes to Social Security, especially with regard to the wage restrictions, which affect both those who are now working and those who are approaching retirement. The beneficiaries will have to understand how these modifications may impact their income if they are nearest full retirement age (FRA) or are still working and receiving Social Security benefits. To begin with, there will be an increase in the maximum wages that are subject to Social Security tax.
The taxable limit is scheduled to rise from $168,600 in the year 2024 to $176,100 in the year 2025. This implies that, in comparison to prior years, you will be paying Social Security tax on a higher percentage of your income if you make more than $176,100 in the year 2019. Higher incomes will therefore see a larger portion of their income subject to the 6.2% Social Security tax.
Salary limits for employees who are below retirement age
The earnings cap will increase to $23,400 in 2025. For every $2 you make over $23,400, the Social Security Administration (SSA) will remove $1 from your payments if you are below FRA and continue to work while collecting Social Security benefits. This is an important consideration if you intend to work and get benefits at the same time. In other words, your benefits will decrease in proportion to the amount you earn above that limit.
Salary limits for employees who reached retirement age
If you are going to be reaching full retirement age in the year 2025, things get a little more lenient. The earnings cap will be significantly higher for individuals who turn FRA, at $62,160. Once you reach full retirement age, the Social Security Administration will take $1 out of your income for every $3 you earn above that threshold.
You have no upper restriction on how much you can make once you achieve FRA and regardless of your income level, your benefits won’t be decreased. According to the Social Security Administration for workers who are under the retirement age or older there is no limit on earnings.
How 2025 Social Security changes impact your retirement plan?
Because of this flexibility, people can continue working without worrying about how their income will affect their benefits once they reach FRA, which for those born in 1959 will be 66 years and 10 months in 2025. Apart from the earnings limit, there is a rise in the Social Security taxable wage limitation.
When the maximum limit is $176,100 in the year 2025, wages beyond that threshold will be subject to the usual 6.2% Social Security tax rate.
- You won’t pay Social Security taxes on anything you make over that threshold, but up until then, your tax burden will likely be larger than in prior years.
- These changes assist to balance the amount workers contribute to the system and preserve the buying power of benefits while inflation continues to affect prices.
- The changes made to Social Security for 2025 take into account both the shifting nature of the economy and the requirement to guarantee that benefits continue to support retiree’s requirements.
