Several updates to Social Security will come into effect in 2025, impacting both beneficiaries and workers who contribute through taxes.
While some changes are specific to individuals at the higher or lower ends of the income spectrum, certain modifications, such as cost-of-living adjustments (COLA), will influence all of Wisconsin’s 1.2 million current Social Security recipients.
Let’s break down these upcoming adjustments and what they mean for you:
1. Social Security Wage Cap Set to Increase
One significant change for 2025 involves the Social Security wage cap, which determines the maximum income that is subject to Social Security payroll taxes. In 2024, the limit was set at $168,600.
For 2025, this cap will rise to $176,100, meaning individuals earning more than this amount will contribute a maximum of $10,918 to Social Security — about $465 more than the previous year.
Key Points:
- The Social Security tax rate for both employees and employers remains at 6.2%.
- Income above the wage cap will not be subject to Social Security taxes, so high earners (e.g., making $1 million) will pay the same amount as someone earning $176,100.
- Most Wisconsinites, with a median household income of $75,670 as of 2023, will not experience any change in their contributions.
2. Changes to Social Security Work Credits
To qualify for Social Security benefits in retirement, individuals need to accumulate 40 work credits, which are earned based on their income. For 2025, the monetary threshold for earning a work credit is changing.
What’s New:
- In 2024, individuals needed to earn $1,730 per quarter to receive a work credit.
- In 2025, the requirement will increase to $1,810 per quarter.
- This adjustment means that people will need to earn $7,240 for four credits in 2025, up from $6,920 in 2024.
These changes are primarily expected to affect part-time workers or those in caregiving roles, as they might find it harder to accumulate credits.
3. Increase in Full Retirement Age
Full retirement age for Social Security benefits is also rising in 2025. While individuals can begin receiving Social Security benefits as early as age 62, taking benefits early results in reduced monthly payments.
- In 2024, the maximum monthly benefit for someone retiring at age 62 was $2,710, but for those reaching full retirement age, the amount increased to $3,822. Individuals who delayed their benefits until age 70 could receive up to $4,873.
Full Retirement Age by Birth Year:
- Born in 1955: 66 years and 2 months
- Born in 1956: 66 years and 4 months
- Born in 1957: 66 years and 6 months
- Born in 1958: 66 years and 8 months
- Born in 1959: 66 years and 10 months
- Born in 1960 or later: 67 years
In 2025, individuals born between May 2, 1958 and February 28, 1959 will reach their full retirement age.
4. Social Security’s Cost-of-Living Adjustment (COLA)
For 2025, Social Security beneficiaries will see a 2.5% increase in their monthly payments, reflecting the cost-of-living adjustment. This COLA increase is the smallest in three years, compared to 3.2% in 2024.
- On average, Social Security payments will increase by $50 in 2025, raising the average payment from $1,907 in January 2024 to $1,957.
5. Social Security and SSI Payment Schedules in 2025
Social Security checks are distributed monthly, with the exact day depending on the recipient’s birth date. SSI checks are issued on the same day for all beneficiaries.
Social Security Check Distribution:
- Payments will continue to be sent on Wednesdays each month.
For more details on the exact distribution schedule, refer to the 2025 schedule when it is released.
In 2025, Social Security will see several important adjustments that primarily affect high earners, part-time workers, and retirees. These changes, including an increased wage cap, modifications to work credits, a rise in full retirement age, and a COLA increase, will ensure that Social Security continues to adapt to economic conditions while providing benefits for millions of Americans.
FAQs
Will the Social Security tax rate change in 2025?
No, the Social Security tax rate will remain at 6.2% for both employees and employers. The change is in the wage cap for taxable earnings.
How does the increase in the wage cap affect high earners?
In 2025, individuals who earn $176,100 or more will pay the maximum Social Security tax of $10,918, which is $465 more than in 2024.
How does the cost-of-living adjustment (COLA) affect Social Security payments?
The COLA increase in 2025 is 2.5%, resulting in an average increase of $50 per month for beneficiaries.
