Each month, the Social Security Administration (SSA) issues thousands of checks to program beneficiaries, who are mostly retirees. These checks are sometimes the highlight of beneficiaries’ months as they make it possible for them to pay their bills and get the basics, especially in this economic climate.
These checks vary vastly between recipients, just by average, according to Social Security Administration data, the estimated average amount 2024 is $1,907, whilst the maximum benefit for those retired at full retirement age in 2024 is $3,822, for those retired at age 62 is $2,710 and for those retiring at age 70 in 2024, the maximum benefit would be $4,873.
However, receiving the maximum Social Security payment is not easy and not everyone can get them, in fact, most people will receive an amount inferior to the maximum, as reflected by the average amount. To be eligible to receive the maximum payment, employees must have met a series of requirements during their working lives, and probably one of the most important ones is to have paid payroll taxes on the maximum taxable income for the 35 highest-earning years of their career.
To figure out whether or not you have paid payroll taxes on your income, you should first know that not all income is taxed. Social Security works on credits, and you need a minimum of 40 credits over 10 years to even qualify for benefits. In 2024 the minimum amount necessary for a credit is $1,730. Which means that you need a minimum of $6,920 for it to count as taxable income.
Just like there are minimums, there are maximums. Because the Social Security program isn’t scalable indefinitely, and there is a very clear maximum in benefits it pays, in 2024 as we have stated it is $4,873, there is a cap on the income you earn and the program taxes. Like all other figures it is adjusted annually, and the 2024 maximum taxable income limit is $168,000, meaning any income above that amount is not subject to Social Security related taxes.
We still do not know what the 2025 limit will be, as it depends on many factors, such as the Cost of Living index and adjustments that will be calculated after the summer, but the Social Security Board of Trustees already has some predictions on what they believe the amount will be. One thing we know for sure is that it will be higher than this year’s limit.
Which workers will have an additional $391 withheld for Social Security?
According to predictions form the Social Security Board of Trustees, the maximum taxable income will be $174,900 next year, and while that may seem like a large number and will most certainly upset some people, the truth is only about 6% of the U.S population currently earns above that amount and would be affected by the increase in tax. And the breakdown of the numbers is also not as outrageous as most people are led to believe.
At a tax rate of 6.2%. the maximum taxable income increase will translate into $391 more in taxes in 2025 that workers will have to pay into the Social Security system. While there are a lot of things one might be able to do with almost $400 more in the bank, especially in this current economic climate, the difference monthly is almost negligible for those affected. Put into perspective, in 2024 the amount of taxes being withheld from these paychecks was $10,453 and in 2025 will climb up to $10,844.
As an added bonus for those who are contributing this new maximum and have been for a few years, the more you contribute now up to the cap and the more you save in the long run for retirement, the more comfortable you will be able to be in your golden years.
Read More: Larger Social Security tax withholdings starting in 2025: Everything will change