On November 1, the fourth quarter began. This means that the Social Security Administration is making big changes in the second half. As the program is updated, some of these changes will be good for retirees and some may make them unhappy.
Also, the Social Security Administration (SSA) just released two important dates that retirees should know about as 2025 draws near: the higher wage base limit and the cost-of-living adjustment (COLA).
Two important changes confirmed for retirees by Social Security.
It is a fact of business life that prices will go up and down. Most of the time, SSA changes monthly payments by a certain percentage every year to help cover these rising costs.
It is called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and it is used to figure out the annual COLA. It figures out the prices of everyday things that salaried and hourly workers buy, like food, transportation, and household items.
SSA uses the percentage difference between the average CPI-W for the three months in the third quarter (July, August, and September) this year and the same time last year to figure out the COLA.
A new COLA increase to become effective in 2025
That number has good news and maybe even more important news. Good news: the 2.5% cost of living adjustment is less than the norm and the smallest rise since 2021. It is good news that inflation has gone down a little. Here is a list of the ten newest COLAs:
| Year | COLA increase |
| 2015 | 1.70% |
| 2016 | 0% |
| 2017 | 0.30% |
| 2018 | 2% |
| 2019 | 2.80% |
| 2020 | 1.60% |
| 2021 | 1.30% |
| 2022 | 5.90% |
| 2023 | 8.70% |
| 2024 | 3.20% |
Keep in mind that the 2016 COLA was 0%. This happens when the CPI-W data from one year is the same as or less than the data from the previous year.
If the CPI-W numbers stay the same or go down, the system will never lower monthly benefits. It will only raise benefits if the CPI-W numbers go up.
The earnings limit will increase next year.
If your wages are more than the annual wage base limit, you will have to pay Social Security payroll tax on that amount. In 2025, the new base pay is $176,100.
If your income is less than that amount, you do not have to pay Social Security payroll taxes on it. These taxes are 6.2% if you work for a company and 12.4% if you work for yourself.
The National Average Wage Index (NAWI) is used by SSA to figure out the annual wage base limit. The NAWI shows the average annual wage of Social Security-eligible workers.
The NAWI from the previous year is compared to the NAWI from the current year to see if there will be an increase.
This is like the COLA in that the wage base limit does not change whether the number goes up or down. It will never go down any more. Here are the ten most recent wage base limits:
| Year | Wage Base Limit |
| 2024 | $168,600 |
| 2023 | $160,200 |
| 2022 | $147,000 |
| 2021 | $142,800 |
| 2020 | $137,700 |
| 2019 | $132,900 |
| 2018 | $128,400 |
| 2017 | $127,200 |
| 2016 | $118,500 |
| 2015 | $118,500 |
Of course, the tax effects of salary base restrictions are the most obvious reason to be worried about them. If your earnings are close to the wage base limit, a change in that limit could affect how much Social Security tax you have to pay.
For instance, if you make $175,000 in 2024, you will not have to pay any Social Security payroll taxes on $6,400. But because your wages in 2025 are less than the wage base level, you will have to pay payroll taxes on the whole amount.
The wage base limit also changes your chances of getting the biggest Social Security payment if you decide to apply for it, which is the second reason you should be worried about it.
In each of the 35 years that the SSA uses to figure out your payment, you must earn at least the wage base limit. You also have to wait until you are 70 years old to start getting benefits.
If you want to get the most money each month, you need to make sure that your wages are higher than the wage base limit.
Also see:-Goodbye to the 2025 COLA – Early Projections for New Social Security Check Increase
