Keeping up with economic fluctuations can be challenging. Staying informed about personal finance factors, within your control, can help foster a sense of empowerment and help you take ownership of your financial well-being. Let’s review some of the latest updates to Social Security Benefits and Pension plans as we roll into 2025.
Social Security 2025 Updates
For more than 72.5 million Americans, Social Security benefits will be adjusted in 2025. Here is a quick overview of the highlights and the impacts they could have. From cost-of-living adjustments to changes in taxable earnings thresholds, these updates are designed to address evolving economic conditions.
What to Know:
- The maximum Social Security benefit for a worker retiring at full retirement age will increase from $3,822 in 2024 to $4,018 in 2025.
- Based on the increase in average wages, the maximum amount of earnings subject to the Social Security tax (taxable maximum) is going to increase to $176,100 from $168,600.
- Supplemental Security Income (SSI) payments will increase 2.5% in 2025 totaling about $50 per month starting in January.
Impacts:
The rise in maximum benefits and Social Security payments will help recipients combat rising housing, healthcare and food costs. The increase in taxable earnings ensures more funds will be added to the Social Security Benefits system, creating a stronger program for those relying on it.
If you’re expecting an SSI payment increase next year, it could be a great time to revisit or establish a budget to maximize the impact of your increased funds. While some financial priorities may be clear, other areas might benefit from a reevaluation of your spending, investments, and savings.
Additionally, it could be advantageous to evaluate how Social Security can affect your retirement strategy. Some choose to draw more from SSI payments instead of relying on investment vehicles. This is a strategy crafted to protect assets that can be passed on to future generations. Social Security benefits cannot be passed down to beneficiaries like a traditional investment. Consider this as your household income adjusts next year.
To learn about a few more ways to maximize Social Security benefits in 2025, review this article: Maximizing Social Security Benefits for Middle to Upper-Income Retirees
Pensions + Other Investment Vehicle 2025 Updates
The Internal Revenue Service announced a series of updates for 2025 to account for cost-of-living adjustments. Let’s review the highlights of these updates and their impacts on Americans.
What to Know:
- Pensions: The annual limit on how much can be paid out from a pension plan will increase in 2025 from $275,000 to $280,000.
- 401(k) Retirement Plans: The maximum amount you can save in a year will increase from $69,000 to $70,000 in 2025. This includes what you and your employer contribute together.
Impacts:
The increases in pension payouts and higher maximum savings limits for retirement accounts in 2025 offer valuable support in addressing inflation battles for those nearing retirement. Those currently in retirement could draw more on their pension plans and those saving for retirement can save just a little bit more in 2025. These developments help address rising concerns regarding rising day-to-day costs including food, housing and healthcare costs.
One way to ensure the best use of these retirement developments is to meet with a professional to chart the best course for 2025. A new year is a beneficial time to chat with your trusted investment professional and ensure you are saving enough or drawing enough to sustain your family in retirement.
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For information and educational purposes only. Does not constitute investment advice or a recommendation.
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