The Social Security system in the United States possesses the significant benefit of being flexible and responsive to the social dynamics, allowing it to adjust its budget according to the population’s needs at any moment. Furthermore, it can enhance the income from pension payments in accordance with the price index, which reflects the increasing costs of goods in the shopping basket and inflation rates. For instance, each year, Social Security benefits can be automatically modified to account for the cost of living. Looking ahead to 2025, benefits have seen a 2.5% increase, which is lower than in previous years, indicating that inflation has not surged as it has on other occasions.
This means that senior citizens who work and receive benefits from the Social Security system will be able to earn more money without running the risk of having part of their income withheld. But not all the changes that have affected the US Social Security system this year apply to pensioners and, in particular, not all the changes are positive. This year, the Social Security system is undergoing two changes that could be detrimental from a financial point of view.
Changes in the SSA that could affect the economy
The Social Security of the United States adapts to the needs and the economy of the citizens, with the aim of making decisions and changes that have a positive impact on the beneficiaries of these benefits and, in this way, alleviate the economic asphyxiation derived from the high prices and avoid situations of vulnerability of these groups. However, not all the innovations made by the administration are always beneficial for pensioners.
Increase in the salary cap
The Social Security system obtains most of its income from the taxes derived from the payrolls of workers. In fact, every year a salary cap is set that determines how much income is taxed for Social Security purposes. In 2024, the salary limit was $168,600, but this year it has risen to $176,100, which means that top earners will pay Social Security taxes on an additional $7,500 in income.
However, the positive side of this change to Social Security is that the more income from payroll taxes that Social Security collects, the better the program will be able to avoid benefit cuts. Similarly, if a taxpayer is affected by the 2025 salary limit increase, it does not mean that they have to resign themselves to a higher IRS bill.
Increase in the value of work credits
In the United States it is possible to collect a retirement pension even in cases where there is no record of any contributions to Social Security. This is based on the so-called spousal benefits, which allow you to collect the benefit after retirement. However, to qualify as a Social Security pensioner based on your own income history, you must accumulate 40 work credits over your working life, at a maximum of four per year.
This year, however, the value of a single work credit is greater than last year, which means that you may have to work a little longer to earn your four credits and, as a result, the legal retirement age in the United States is being delayed, a measure that affects the entire population. In terms of numbers, last year, one credit for individual work was equivalent to $1,730 of income, while this year the amount rises to $1,810. This change should only affect people who work part-time, but it may be the case of citizens who are full-time parents or caregivers and have few opportunities to earn income.