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3 Numbers Every Social Security Retiree Needs to Know Before 2025
Some important changes are coming to Social Security in 2025, and there are a few key numbers that you must know in order to understand and prepare for them. Here are three key numbers every retiree needs to be aware of so they’ll be ready when the new year rolls around.
1. The Social Security COLA
The first number to be aware of is the Cost-of-Living Adjustment, or COLA, that will take effect in 2025. A COLA is a benefits increase that retirees receive in most years in order to ensure the buying power of their Social Security does not erode as a result of inflation.
In 2025, the COLA is going to be 2.5%. This means seniors will see their benefits increase by this amount. For retirees receiving the current average benefit of $1,927, the coming increase will result in a new average benefit of $1,976, so checks will go up by around $49.
Your own benefits increase may be bigger or smaller than $49 depending on how big your current benefits are.
Although the process of calculating your exact raise can be complicated, you can get a pretty good idea of how much more money you’ll get next year by simply multiplying your current benefit by 2.5%. Social Security is also going to be sending out an official notice in December so you can see your exact increase soon.
2. The 2025 work limits
The next number to be aware of is the work limit. This is the amount of money you can earn while collecting Social Security benefits before full retirement age without the size of your checks being affected.
See, you’re allowed to work as much as you want and double dip with benefits once you’ve reached your FRA but not before. If you haven’t hit FRA, here’s what the work limits look like:
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You can earn $23,400 per year in 2025 if you will be under FRA for the entire year. This is up from $22,320 per year in 2024. Once you exceed this amount, you’ll forfeit $1 in benefits for every extra $2 above the limit.
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You can earn $62,160 per year in 2025 if you will reach FRA at some point during the year. This is an increase from $59,520 in 2024. Once you’ve hit the limit, benefits are reduced by $1 for every $3 in excess earnings.
If you’re planning to work as a retiree while getting benefits, you must know these new limits so you’ll find out exactly how much you can earn without your Social Security checks being impacted by your paycheck.
3. The taxable-benefits threshold
Finally, there’s one more number to know: the income threshold at which benefits become taxable. This is a little confusing, because not all income counts. It’s based on something called “provisional income,” which you can calculate by adding up half your Social Security benefits, taxable income from other sources, and some non-taxable income including municipal bond interest.
If this provisional income goes above a certain level, then you get taxed on part of your benefits. Here’s what those levels are.
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If you are a single tax filer, up to 50% of benefits could be taxed with a provisional income between $25,000 and $34,000. This is unchanged.
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If you are a single filer and your provisional income exceeds $34,000, then up to 85% of your benefits could be taxed. This is also unchanged.
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If you are a married joint filer, up to 50% of benefits will be taxed with a joint provisional income between $32,000 and $44,000, and up to 85% of benefits will be taxed once your provisional income hits $440,000. This is unchanged.
It may surprise you to learn that the threshold at which benefits become taxable isn’t changing even though the COLA is increasing your monthly payment amount and even though other key numbers, like the work limit, are changing.
The reason is simple: While most parts of Social Security adjust automatically to keep pace with inflation, that’s not the case for the threshold at which benefits become taxable. That’s actually a big issue that has resulted in a growing number of retirees owing taxes on benefits.
By understanding these three numbers, you can find out key details about whether you’ll owe taxes, how big your benefits are going to be next year, and how much you can work while you’re collecting a Social Security check. This information can help you to make informed financial plans so you’re ready when 2025 arrives.
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The Motley Fool has a disclosure policy.
3 Numbers Every Social Security Retiree Needs to Know Before 2025 was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
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Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
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Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
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Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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