The Social Security Administration announced a cost-of-living adjustment of only 2.5% for 2025, marking the smallest increase since 2022. This results in an average increase of $49 a month, but the rise of Medicare Part B costs means many seniors may not feel this benefit.
In addition to the modest COLA, the wage cap for Social Security taxes will rise significantly from $168,600 in 2024 to $176,100 in 2025, imposing an additional $930 in taxes for higher earners.
The future of Social Security is under pressure as an influx of retirements from baby boomers, coupled with a potential shrinking workforce, threatens to diminish the program's revenue and may lead to benefit cuts.
The increase in the wage cap for Social Security taxes highlights the shifting financial burden onto higher earners and the self-employed, who will contribute more, reflecting broader fiscal challenges facing the system.
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