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2 Social Security Changes That Could Hurt You Financially in 2025

One positive aspect of Social Security is that the program is set up to adapt to economic changes. Each year, for example, Social Security benefits are eligible for an automatic cost-of-living adjustment.

In 2025, benefits rose 2.5%. And while that’s the smallest COLA to arrive in years, it’s a sign that inflation isn’t surging quite as badly as in recent years.

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Social Security cards.

Image source: Getty Images.

Social Security’s earnings test limits also rose in 2025. This year, seniors who work and collect benefits will be able to earn more money without risking having a portion of their Social Security withheld.

But not every change that’s hit Social Security this year applies to retirees. And not every change is a positive one.

This year, Social Security is undergoing two changes that could be a bad thing, financially speaking. Here’s what they are — and what to do about them.

1. The wage cap is rising

Social Security gets the bulk of its revenue from payroll taxes. Each year, a wage cap is set that determines how much income is taxed for Social Security purposes.

In 2024, the wage cap sat at $168,600. But this year, it’s up to $176,100, which means higher earners will pay Social Security tax on an extra $7,500 of income.

At first, that might seem like bad news. The silver lining, though, is that the more payroll tax revenue Social Security collects, the better job the program might do of staving off benefit cuts.

Of course, if you’re someone who’s impacted by 2025’s wage cap increase, it doesn’t mean you have to resign yourself to a higher IRS bill. There may be steps you can take to minimize the tax hit. These could include maxing out your IRA or 401(k) plan and contributing to a health savings account if your health insurance coverage makes that possible.

You can also try harvesting investment losses strategically to offset some of your income. A financial advisor or tax professional may have tips specific to you, so if you’re concerned about a higher tax bill this year, it pays to meet with one.

2. The value of work credits is going up

It’s possible to collect Social Security in retirement even if you never worked — for example, by claiming spousal benefits. But to qualify for Social Security based on your own earnings record, you’ll need to accumulate 40 lifetime work credits at a maximum of four per year. This year, though, the value of a single work credit is higher than it was last year, which means you may need to work a bit more to get your four credits.

Last year, a single work credit was worth $1,730 of earnings. This year, it’s up to $1,810.

This change should really only impact people who work on a very part-time basis. But that may be the case if you’re mostly a full-time parent or caregiver and have little opportunity to earn an income.

One thing you may want to do if your earnings opportunities are minimal, though, is give up an hourly job in favor of gig work. With gig work, you may be able to set your own schedule, enjoy more flexibility, and ramp up your hours and earnings just enough to snag your four credits.

Not every Social Security change that takes place from year to year is a positive one. And it can be argued that these two updates are bad news for people still working. But now that you know about them, you can take steps to work around them.

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