As the new year approaches, it’s an excellent time for Social Security recipients to get ahead of any changes coming in 2025. The Social Security Administration (SSA) is implementing new updates, and understanding how these adjustments affect your benefits can save you from confusion and ensure you’re prepared for the year ahead.
Social Security benefits are an essential source of income for over 70 million people across the United States. With such an important part of your financial security at stake, it’s critical to take some time to review how these upcoming changes will impact you. Here’s a guide to help you navigate the adjustments and make sure you don’t miss anything important before the year ends.
1. Calculate Your New Social Security Check with the COLA Adjustment
Each year, Social Security benefits are adjusted for inflation through a cost-of-living adjustment (COLA). In 2025, Social Security recipients will see a 2.5% increase in their monthly benefits, including retirement benefits.
Calculating your new benefit amount is straightforward. Simply take your last Social Security payment, apply the 2.5% increase, and add the resulting amount to your current benefit. For example, if your monthly benefit is $1,880, a 2.5% increase will raise it by about $47, bringing your new monthly benefit to $1,927.
This small but significant adjustment helps ensure that your benefits keep pace with inflation, helping to maintain your purchasing power.
2. Familiarize Yourself with the 2025 Benefits Calendar
While the delivery dates for Social Security benefits remain largely the same, it’s still important to double-check the benefits calendar for the upcoming year. Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) recipients will see no change in the schedule, with payments continuing to be delivered on the first of each month.
- SSI payments will be distributed on January 1, 2025 (since January 1 falls on a Wednesday, the payment is moved to the last day of 2024).
- Retirement benefits are distributed based on your birth date:
- If your birthday falls between the 1st and 10th of the month, your payment will be on the second Wednesday.
- Birthdays from the 11th to 20th receive payments on the third Wednesday.
- Those with birthdays from the 21st to 31st get their payments on the fourth Wednesday.
Be aware that these dates may shift due to national holidays, so keeping an eye on the SSA’s calendar can help you avoid missed payments.
3. Double-Check Your Full Retirement Age
If you’re planning to retire in 2025, it’s crucial to verify your Full Retirement Age (FRA). Your FRA is the age at which you can begin receiving full Social Security benefits.
- If you were born before 1959, you are already at or past your FRA and are eligible for full benefits.
- Born in 1959? Your FRA is 66 years and 10 months, which means you can start collecting full benefits once you turn 66 years and 10 months old in 2025.
- Born in 1960 or later? Your FRA is 67, meaning you must wait until you turn 67 before collecting full benefits.
Understanding your FRA helps you plan your retirement timing and avoid reductions in your monthly payments if you claim benefits too early.
4. Determine Your Income Tax Obligation on Social Security Benefits
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One often overlooked aspect of Social Security is the taxability of your benefits. If you have additional sources of income, such as wages, interest, or investment returns, a portion of your Social Security benefits could be taxable. Around 40% of Social Security beneficiaries are required to pay federal income taxes on their benefits.
Taxes are determined based on your provisional income, which is calculated as:
- Adjusted Gross Income (AGI)
- Plus nontaxable interest
- Plus half of your Social Security benefits
Here’s the breakdown for tax rates based on provisional income:
- For single filers:
- Less than $25,000: No taxes on benefits
- $25,000 to $34,000: Up to 50% taxable
- Over $34,000: Up to 85% taxable
- For married couples filing jointly:
- Less than $32,000: No taxes on benefits
- $32,000 to $44,000: Up to 50% taxable
- Over $44,000: Up to 85% taxable
Make sure to review your provisional income and prepare for potential taxes on your benefits, particularly if you have other income streams.
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5. Review the Earnings Test and Its Impact on Your Benefits
If you plan to continue working while receiving Social Security benefits, you should review the Earnings Test, which could reduce your benefits if you earn above certain limits before reaching Full Retirement Age.
- For those under full retirement age in 2024: The earnings limit is $22,320. The SSA will deduct $1 for every $2 earned above this amount.
- For those turning full retirement age in 2025: The higher limit of $62,160 applies. The SSA will deduct $1 for every $3 earned above this limit, but only for earnings before the month you reach your FRA.
If you earn more than the limit, it’s essential to plan accordingly and understand how the SSA will adjust your monthly benefit. For some, continuing to work may lead to a reduced benefit amount, but for others, it may be worth the trade-off, especially if you’re delaying claiming your full benefits.
Conclusion: Take Action Before December 31, 2024
With all the changes on the horizon for Social Security in 2025, now is the time to take action. By calculating your new benefit amount, understanding the 2025 payment schedule, verifying your retirement age, reviewing your potential tax obligations, and considering the Earnings Test, you can avoid surprises and ensure that you are fully prepared for the new year.
Don’t wait until the last minute—review these points now and make any necessary adjustments to your retirement plans. Preparing ahead of time will help you enjoy a smoother transition into 2025 and beyond, giving you the confidence to navigate any changes the Social Security Administration brings your way.