As you plan for your financial future, staying informed about changes to Social Security is key. In 2025, there will be important updates to the payment schedule, a new Cost-of-Living Adjustment, and changes in retirement planning. These updates could impact your retirement and estate planning. Here’s what you need to know to maximize your financial security.
The Social Security Administration has set up the payment schedule for 2025, giving important dates for beneficiaries to track their incomes. Payments will be made monthly, following a new schedule with specific dates each month. This helps beneficiaries manage their finances more smoothly throughout the year.
Key Takeaways
In 2025, Social Security payments will see changes in payment schedule, Cost-of-Living Adjustment (COLA), and retirement planning, which may impact financial security.
- The COLA for 2025 will increase benefits by 2.5%, with the average benefit rising from $1,927 to $1,976 per month.
- The maximum taxable earnings subject to Social Security taxes will rise from $168,600 in 2024 to $176,100 in 2025.
- Estate planning is crucial for a secure future, including understanding survivor benefits and using trusts to manage assets and care for beneficiaries.
Modest COLA increase for 2025
The Cost-of-Living Adjustment for 2025 will increase benefits by 2.5%. This is the smallest annual COLA since 2021, due to easing inflation. The 2.5% increase will mean about $50 more per month for retired workers, raising the average benefit from $1,927 to $1,976. Couples with both partners receiving benefits will see their payments increase from $3,014 to $3,089. COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which measures price changes in living costs.
Some senior advocates feel this modest increase might not fully cover the rising costs for retirees, especially in healthcare. The CPI-W reflects worker spending patterns but might not capture retirees’ expenses, like healthcare, accurately. Advocates, such as AARP’s Bill Sweeney, believe many seniors feel this increase isn’t enough to cope with rising prices in healthcare, housing, and utilities.
Key 2025 Social Security updates
Other changes include the rise in the maximum taxable earnings subject to Social Security taxes, going from $168,600 in 2024 to $176,100 in 2025. The maximum benefit for a worker retiring at full retirement age will also rise from $3,822 to $4,018. These updates are due to economic trends and help benefits stay in step with inflation.
For those receiving benefits, keeping track of the updated payment schedule is important. Payment dates differ based on the recipient’s birth date or program. People born from the 1st to the 10th of the month will get their first COLA on January 8, those born from the 11th to 20th on January 15, and those born from 21st to 31st on January 22.
People who started getting Social Security before May 1997, or receive both Social Security and SSI, will get it on January 3. SSI recipients might get payments earlier or on different dates if weekends or holidays affect payment timing.
The SSA also changes the earnings test exempt amounts for those getting Social Security before full retirement age. In 2025, the amount you can earn without benefits being reduced will increase to $1,950 per month ($23,400 yearly), up from $1,860 per month in 2024. This lets people earn more while receiving benefits, giving more flexibility to work part-time. In the year you turn full retirement age, you can earn up to $5,180 per month ($62,160 yearly) before benefits are reduced, under more relaxed terms compared to earlier years.
Importance of estate planning
Social Security is a big part of retirement income for many Americans, but it shouldn’t be your only focus for the future. Estate planning, which includes things like wills and trusts, is important too. It’s about making sure your assets go where you want and your family is taken care of. Knowing how Social Security fits into your overall financial plan is crucial for a secure future.
When planning your estate, think about how Social Security benefits will work with other income like pensions, savings, and investments. Trusts can help manage these assets, reduce taxes, and provide for loved ones. A revocable living trust, for instance, lets beneficiaries access funds without probate, while ensuring Social Security benefits continue to a surviving spouse smoothly.
Trusts play a key role in managing your assets and caring for beneficiaries. For example, a special needs trust can support a disabled family member without affecting their government benefits. Additionally, irrevocable trusts can protect assets from estate taxes or creditors, providing security for your loved ones.
A key part of including Social Security in estate planning is understanding survivor benefits. When one spouse dies, the surviving spouse may get a portion of the deceased spouse’s benefits. Having the right paperwork and plan can make this transition easier. Survivor benefits can be up to 100% of the deceased worker’s benefit, depending on factors like the surviving spouse’s age and when the claim was made.
Talking to an estate planning attorney can help make the most of these benefits and fit them into your overall plan. It’s also important to think about how other parts of your estate, like life insurance and retirement accounts, fit together. An attorney can offer advice on naming assets correctly, updating beneficiary info, and using trusts to meet your goals.
Achieving financial security for retirement
Planning for retirement isn’t just about understanding Social Security benefits—it means looking at your whole financial picture, including savings, investments, and backup plans. Many Americans don’t know how much they’ll get from Social Security, which makes planning harder. A study shows that only 11% of Americans know their exact future Social Security benefits. This uncertainty shows why it’s important to learn more about finances and plan for retirement.
To better plan your finances, consider making an account on the SSA’s website. With the “My Social Security” portal, you can see a personalized estimate of your future benefits, check your contribution history, and fix any mistakes. Knowing your expected benefits can help you make smart choices about other income sources like pension plans, savings, or annuities.
A solid retirement plan includes a mix of Social Security benefits, work retirement plans, and personal savings. By having different income sources, you’re not relying too much on just one, which can be helpful if times get tough. For example, high-yield savings accounts are a safe spot for your emergency money while earning more interest. IRAs and 401(k) plans offer tax benefits, helping your retirement savings grow over time.
Deciding when to start Social Security benefits is key. Whether you claim at age 62, full retirement, or even 70, it impacts your total lifetime benefits. Waiting can boost your monthly amount, but compare this to your needs, health, and finances. For instance, if you wait until age 70, your payment could increase by up to 32%, which helps if you live longer or have other income sources meantime.
Consider inflation when planning retirement. The COLA helps Social Security benefits keep up with inflation, but it might not cover rising healthcare costs and other needs. That’s why having more income sources and growing investments is important for staying financially secure during retirement. Older adults might also look into long-term care insurance for future healthcare costs.
Keep informed on changes, use resources like the SSA’s website, and talk to financial and estate planning experts to ensure stability in retirement. By planning carefully and being familiar with your benefits, you can make the most out of Social Security and protect your wealth through wise estate planning. These steps can help ensure a comfortable retirement and care for your loved ones, even after you’re gone.
