All articles tagged with #earnings test
In 2025, Social Security will see several changes, including a 2.5% cost-of-living adjustment (COLA), an increase in the earnings-test limit to $23,400, a rise in the wage cap to $176,100, and a higher earnings threshold for work credits at $1,810 per credit. These adjustments will affect both current retirees and those still working, highlighting the importance of understanding these changes for financial planning.
Claiming Social Security at 62 can lead to smaller checks due to early claiming penalties, resulting in a 25-30% benefit reduction depending on one's full retirement age (FRA). Additionally, cost-of-living adjustments (COLAs) will be smaller in dollar terms compared to those who claim later, and there's an earnings test that could temporarily reduce benefits for those who continue to work. While claiming early may be suitable for some, it's important to understand these implications to avoid surprises in retirement income.
The Social Security Administration has announced new numbers for 2024 that workers should keep in mind. The maximum taxable earnings for Social Security will rise to $168,600 in 2024, and workers pay a 7.65% tax for Medicare and Social Security. Social Security beneficiaries who work may face an earnings test, with the threshold increasing to $22,320 in 2024. Additionally, up to 85% of Social Security benefit income may be subject to federal taxes based on combined income. The tax thresholds for benefit income have not been updated, potentially leading to more beneficiaries being liable for federal income taxes.