Blog

Feb 19, 2025

Social Security 2025 changes for both top, bottom California earners

Changes are coming to Social Security in 2025 that may cause issues for top and low-end earners. There have already been changes like increasing percentages and raising earnings test limits for those

Changes are coming to Social Security in 2025 that may cause issues for top and low-end earners.

There have already been changes like increasing percentages and raising earnings test limits for those collecting Social Security under the retirement age, but two changes to Social Security that will affect employees have yet to hit.

In 2025, Social Security benefits rose 2.5% to keep up with cost-of-living adjustments. The earnings test limit also rose. As for negative impacts, changes are coming to the wage cap and earning work credits.

In California, 16.3% of the population, about 6.2 million, is over 65, meaning they are eligible for Social Security benefits. However, the number of residents on Social Security may be higher or lower depending on factors such as people working later than the retirement age, 66 to 67, or people taking an early retirement starting at 62.

Here are the changes coming to Social Security that may have a negative impact on top and bottom earners.

Most of the revenue for Social Security comes from payroll taxes that everyone pays, and a wage cap is set each year to determine how much of a person's income is subject to Social Security payroll taxes. The percentage of earnings taxed is 6.2%, so if you earn enough, the cap for your pay may increase.

The wage cap, or the limit on taxable earnings, was $168,600 last year. In 2025, it will increase to $176,100. This means those earning more than $176,100 will pay no more than $10,918 in social security taxes in 2025—about $465 more than last year.

In California, the median householdincome was $96,335, according to the Census, meaning Californians on the high end of the income scale will see their Social Security contributions go up.

Social Security is trying to avoid benefit cuts by adding more money to its draining budget. As the funds are projected to be depleted by 2035, this may be a temporary change, or the wage cap may increase again to try to allow more money to be fed into the program.

Starting in January, the number of Social Security beneficiaries in 2025 is expected to increase by about $50 per month.

To qualify for Social Security from your earnings, you'll need to accumulate 40 lifetime work credits at a limit of four per year.

In 2025, the requirements for earning a work credit are changing. In 2024, a person must earn $1,730 to earn a work credit, but this year, the number has increased to $1,810. Thus, in 2025, a person must make $7,240 to earn four credits, whereas in 2024, they only had to make $6,920.

This change is expected to affect those who rely on part-time or work as full-time caregivers and parents.