A lot of people get excited for the month of October because they love all things fall and can't wait to celebrate Halloween. But there's another reason to be glad October is just around the corner.
On Oct. 10, the Social Security Administration (SSA) will be set to announce a number of key changes to the program -- changes that could impact you even if you're not yet collecting benefits. Here are three key updates we should get that day.
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1. Social Security's 2025 cost-of-living adjustment (COLA)
For months, there's been speculation about next year's Social Security COLA. Based on inflation readings to date, the most recent estimate by the nonpartisan Senior Citizens League puts 2025's COLA at 2.5%. However, that number could wiggle upward or downward, depending on how inflation trends during the month of September.
Of course, getting an official COLA from the SSA is only part of the story. If you're a Social Security recipient, you may not really know how much more money to expect in your monthly benefit payments until Medicare announces its standard Part B premium for 2025.
That's because seniors who are enrolled in both programs simultaneously have their Part B premiums deducted automatically from their Social Security benefits. So even if you end up with a certain raise thanks to an upcoming COLA, an increase in the cost of Medicare could, unfortunately, wipe a decent chunk of it out.
2. Social Security's 2025 earnings-test limit
Seniors can earn money from a job while receiving monthly Social Security benefits. And once full retirement age arrives, you can earn any amount of money without it negatively impacting those monthly payments.
But if you're working and receiving Social Security before having reached full retirement age, you'll be subject to an earnings-test limit. Exceeding that limit generally results in having a portion of your benefits withheld.
Now the good news is that withheld benefits are repaid to you once full retirement age arrives. But it's important to know how much money you can earn from a job before that scenario arises.
The current earnings-test limit is $22,320, or $59,520 for those who haven't reached full retirement age yet but will do so before the end of 2024. These numbers are expected to rise in 2025 in line with inflation, but you'll want to pay attention to the specific limit that applies to you.
3. Social Security's wage cap
Social Security is funded by payroll taxes. But workers don't automatically pay those taxes on every dollar they earn.
Each year, a wage cap is put in place for Social Security tax purposes, and earnings beyond that cap are exempt. The current wage cap is $168,600. But like the earnings-test limit, that number is expected to increase in 2025 to account for inflation and wage growth. This means that higher earners should prepare to lose more of their paychecks. If you think you're in that category, you may want to sit down with a tax professional to talk through strategies of minimizing your overall IRS burden.
Millions of Americans of all ages have the potential to be impacted by these big Social Security changes. If that includes you, you'll definitely want to check out the SSA's website on Oct. 10 to read up on them officially.
