What’s New in 2025 for Social Security?

The maximum amount of income subject to tax for Social Security in 2025 will be $176,100. Income above this threshold is not taxed for Social Security.

How Much Do Retirees Rely on Social Security?

Gallup has been conducting an annual poll to determine how heavily retirees rely on Social Security. Between 80 percent and 90 percent of respondents—including 88 percent in April 2024—noted that their Social Security benefits are an important source of their income. Nine out of 10 seniors believe they would financially struggle without the program.

Taxes on Social Security Benefits

Posting on Truth Social last July, then-former President Donald Trump wrote, “Seniors should not pay tax on Social Security.” Trump’s proposal, simply put, is to end this tax on benefits and allow retirees to hang onto more of their income. You might ask what currently triggers taxes on social security and what those taxes are. That requires knowing both your filing status and your total taxable income.

Fifty percent of a taxpayer’s benefit may be taxable if they are either:

• single, head of the household, or a qualifying widow or widower with $25,000 to $34,000 income
• married and filing separately with $25,000 to $34,000 income
• married and filing jointly with $32,000 to $44,000 income

Up to 85 percent of a taxpayer’s benefits may be taxable if they are either:

• single, head of the household, or a qualifying widow or widower with more than $34,000 income
• married and filing jointly with more than $44,000 income
• married and filing separately and lived apart from their spouse with more than $34,000 income

Social Security Funding Crisis

Social Security is careening toward a financial cliff that could lead to a drastic cut in benefits for 70 million Americans, with a typical couple facing a payment reduction of $16,500 by 2033, according to a recent analysis from the Committee for a Responsible Federal Budget (CRFB).

The trust fund will be tapped out by 2033, which would then trigger an automatic 21 percent cut to the monthly checks, regardless of filing or income status, the CRFB analysis stated. Many retirees are already financially stretched, especially because four in 10 seniors live solely on the average $1,783.55 monthly check.

Eliminating the taxation of benefits would deprive Social Security of a substantial source of income through 2035. But there are also other proposals that would be expected to reduce the program’s asset reserves and/or lower collectible income, such as:

• Ending taxation on tips and overtime, which would reduce payroll tax income.
• Changing immigration restrictions, which might have consequences for Social Security. The deportation of illegal immigrants would be expected to lower payroll tax income.

Deciding When to Take Social Security Benefits

Deciding when to take Social Security benefits is a personal decision that depends on various factors, including your financial situation, health, and retirement plans. The best time to take Social Security benefits depends on your circumstances. It might be prudent to consult a financial adviser before making your decision.

• Full retirement age: This is the age at which you qualify for 100 percent of your Social Security benefits based on your work history. If you were born after 1960, the FRA is 67. If you claim benefits before your FRA, your monthly payments will be less.
• Early claiming: You can start receiving benefits at age 62, but the payments will be reduced by 30 percent. Sometimes, however, it might be necessary, say, for health reasons.
• Delayed claiming: Delaying your benefits until you are 70 can significantly increase your monthly payments. For each year you delay, your benefits grow by about 8 percent per year. This can result in a 24 percent overall increase if you wait until age 70.
• You can’t predict how long you will live, but by the time you are 62, you have a sense of your general health and the likelihood of living fewer years or decades longer. This is the key basis for making your choice when to begin Social Security benefits. Your decision can also affect your spouse’s benefits. Married couples should consider strategies that maximize their combined benefits.

Conclusion and Key Takeaways

Concerns about the future solvency of Social Security and potential benefit cuts are understandable, but the best we can do is to stay informed about legislative changes that could affect our benefits.

But where we do have control is learning about and understanding how working can affect our benefits before reaching full retirement age. Balancing Social Security with other retirement income sources and choosing when to retire are the most important factors when it comes to financial planning. Consider these factors:

• Maximum Social Security payroll for deductions rises to $168,600.
• The vast majority of retirees rely completely or heavily on Social Security benefits.
• Trump has proposed ending taxes on Social Security benefits for seniors.
• Current taxes on Social Security benefits depend on filing status and total income.
• Unless new funding is identified, the Social Security benefits will be reduced by 2033.
• The decision for when to start Social Security benefits depends on your health and the size of your retirement cushion; wait until age 70 for the maximum benefits.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.