As the year draws to a close, Social Security recipients have an important opportunity to take actions that could help maximize their benefits.
Whether you’re receiving Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), or retirement benefits, taking a few simple steps before December 31st can make a difference in the amount of support you receive, and even help you plan for a financially stable year ahead.
Here’s what you should do before the end of the year to make the most of your Social Security benefits.
1. Review Your Annual Social Security Statement
The Social Security Administration (SSA) sends out an annual statement to beneficiaries that includes a breakdown of your benefits and the total earnings on which your benefits are based. It’s a good idea to review this statement carefully to ensure all the information is correct.
If you spot any discrepancies, such as missing work history or incorrect income, it’s important to address them right away by contacting the SSA.
For those not yet retired, the statement also provides a projection of your future benefits based on your earnings history. This review can help you plan for your retirement and understand the timing of when to start receiving benefits to maximize your monthly payments.
2. Check for Cost-of-Living Adjustments (COLA)
Each year, Social Security benefits are adjusted for inflation through a Cost-of-Living Adjustment (COLA). For 2024, the COLA increase was set at 3.2%, meaning many Social Security recipients will see a modest rise in their monthly payments.
Before December 31st, it’s important to check how this increase will affect your benefit amount, especially if your benefits are just about to be adjusted for the new year.
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This adjustment may also impact other financial areas, such as your taxes or how you budget for the next year, so it’s wise to review your upcoming payment amounts and incorporate them into your plans.
3. Make Sure Your Taxes Are in Order
Social Security benefits are subject to federal income taxes depending on your total income for the year. If you are working while receiving Social Security or have other sources of income, you may be required to pay taxes on your benefits. The SSA provides tax statements (Form SSA-1099) to show how much of your benefits are taxable.
If you find that your income exceeds the thresholds for taxation, it may be wise to adjust your tax withholding for the upcoming year. For example, you can elect to have taxes withheld directly from your Social Security payments. By doing so before December 31st, you can avoid any surprise tax bills come tax season.
Additionally, if you are near the annual earnings limit (for those under full retirement age), earning above it can reduce your benefits temporarily. It’s important to review your earnings and adjust accordingly to avoid a reduction in benefits.
4. Maximize Contributions to Your Retirement Savings
If you’re working while receiving Social Security benefits, or if you plan to delay your Social Security retirement benefits to maximize your monthly payouts, consider contributing to other retirement accounts like an IRA or 401(k) before December 31st. Contributions to tax-deferred accounts can reduce your taxable income for the year and help you grow your retirement savings.
Even if you’re already retired and receiving Social Security benefits, maximizing your retirement savings through other methods could make a big difference in your financial future, especially if you still have income-generating opportunities or wish to leave a financial legacy.
5. Plan for Healthcare Expenses
Healthcare can be one of the biggest expenses for Social Security recipients, especially as you age. Before the year ends, take the time to review your Medicare plan and any supplemental insurance coverage you may have. Make sure you’re enrolled in the appropriate Medicare plan for your needs, whether that’s Original Medicare, Medicare Advantage, or prescription drug coverage (Part D). Open enrollment for Medicare usually runs from October 15 to December 7, so ensure any necessary changes to your coverage are made before the deadline.
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Additionally, reviewing your healthcare expenses and any medical tax deductions you may be eligible for can help you plan ahead financially.
6. Update Your Beneficiary Information
If your life circumstances have changed — for example, you’ve married, divorced, or had children — it’s a good time to update your Social Security beneficiary information. This ensures that, should anything happen to you, the correct people will receive your benefits.
This step is also important if you’ve recently had a significant life change, such as the loss of a spouse, as their Social Security benefits may be available to you as a survivor benefit. Updating this information will help ensure that you or your loved ones receive the benefits you’re entitled to.
7. Stay Informed About Future Changes to Social Security
Social Security policies can change from year to year. It’s important to stay informed about upcoming changes, such as adjustments to the Social Security Full Retirement Age (FRA) or updates to the Social Security Disability Income (SSDI) program. These changes could impact your eligibility, payment amounts, and even the timing of your benefits.
Make it a habit to check the SSA’s official website or subscribe to their updates for any changes that may affect your benefits. Staying proactive ensures you’re prepared for any shifts in Social Security policies or adjustments in the coming year.
Conclusion
The end of the year is a crucial time for Social Security recipients to review their benefits, plan for taxes, adjust their healthcare coverage, and ensure their personal and financial information is up to date.
By taking these steps before December 31st, you can help maximize your Social Security benefits and set yourself up for a stable financial future.
Taking time now to review your situation can give you peace of mind and prevent any surprises come the new year. Whether you’re receiving retirement, disability, or survivor benefits, being proactive with your Social Security benefits is a key part of managing your finances and securing your well-being in the years to come.