If you are a Social Security beneficiary in Arizona, there are two major changes you need to be aware of in 2025. This year, there is a 2.5% increase in Cost of Living Adjustments (COLA) as well as an increase in the Earnings Test Limit. However, there may also be some negative effects, especially with regard to the Wage Cap and Work Credit.
In Arizona, 19.3% of the population, or about 1.46 million people 65 years of age or older, are eligible for Social Security benefits. But this number can fluctuate, as some people continue to work until retirement age (66 to 67 years), while some take early retirement at age 62.
Let’s find out what changes are coming to Social Security in 2025 and how they will affect Arizona residents.
Changes to the Social Security Pay Cap
Most of Social Security’s income comes from payroll taxes, which every employee pays. Each year, the government sets a pay cap, which limits how much of an individual’s income is subject to the Social Security payroll tax. The rate of this tax is 6.2%, which means that if you earn more than a certain amount, your total liability could increase.
The pay cap was $168,600 in 2024, but it increases to $176,100 in 2025. This means that people who earn more than $176,100 will now pay a maximum of $10,918 in Social Security taxes in 2025—about $465 more than last year.
The median household income in Arizona is $76,872 (according to the Census), so most people won’t be directly affected by this change. However, higher-income individuals will face a hike in Social Security taxes.
Efforts to prevent future benefit cuts
The Social Security Administration is trying to collect more money to keep the program financially sustainable. It is estimated that Social Security’s funds could run out by 2035, so it is possible that the wage cap will be raised further in the coming years to collect more money.
Beneficiaries receiving Social Security in 2025 will see an average increase of $50 per month starting in January.
Changes to Social Security Work Credits
If you want to qualify for Social Security on your own earned benefits, you need a total of 40 work credits. Up to four credits can be earned each year.
In 2025, the amount of work credits required to earn has increased. In 2024, one had to earn $1,730 to earn one credit, while this amount has increased to $1,810 in 2025. This means that one would have to earn $7,240 to earn four credits in 2025, up from $6,920 in 2024.
This change could affect people who are still in the process of earning their required credits and trying to qualify for Social Security benefits. Especially people who are working part-time or at low wages will now have to earn more to meet their qualifications.
Conclusion
These changes to Social Security in 2025 will be beneficial for some people, while they may pose challenges for others.
- Wage cap increase: People with higher incomes will now have to pay more taxes, which will provide more revenue to the Social Security program.
- Changes in work credit requirements: People will now have to earn more income per credit to be eligible for Social Security.
- Benefit increases: Beneficiaries will receive an additional $50 each month due to the 2.5% COLA increase.
If you rely on Social Security or plan to benefit in the future, it’s important to understand these changes and plan your finances accordingly.
FAQs
Q. What are the Social Security changes in 2025?
A. Social Security benefits increased by 2.5%, and the earnings test limit rose. The wage cap and work credit requirements also changed.
Q. How does the wage cap change affect Social Security taxes?
A. The wage cap increased from $168,600 to $176,100, meaning higher earners will pay more in Social Security taxes.
Q. What is the new work credit requirement in 2025?
A. In 2025, you must earn $1,810 to get one work credit, up from $1,730 in 2024. To earn four credits, you need $7,240.
Q. How much more will Social Security beneficiaries receive in 2025?
A. On average, beneficiaries will see an increase of about $50 per month starting in January 2025.
Q. Will Social Security benefits be cut in the future?
A. Social Security funds are projected to be depleted by 2035, so future changes, including potential tax increases or benefit adjustments, may occur.