In 2025, Social Security changes will bring new tax rates for higher earners and impact certain beneficiaries. Here’s what to expect:
FICA taxes will increase for those earning above $176,100 due to a rise in the maximum taxable earnings limit. However, the FICA tax rate remains unchanged at 15.3%.
A key change affects those receiving Social Security retirement benefits before full retirement age (FRA). The withholding rule for benefits will increase from $22,320 to $23,400 for every dollar earned above that amount. This threshold will also rise to $62,160 in earnings required to trigger additional benefit withholding.
The most painful change may be the 2.5% cost-of-living adjustment (COLA) received by all Social Security beneficiaries starting January 2025. While the COLA aims to protect benefits from inflation, it may not keep pace with rising medical costs, which are expected to increase more than the COLA.
To minimize the pain, consider tracking expenses, reducing them wherever possible, and seeking additional income through part-time work or freelancing. Prioritizing health and preventing medical expenses will also help retain more of your Social Security benefits.
Source: https://www.fool.com/retirement/2024/12/14/heres-the-1-social-security-change-in-2025-thats-g