4 Money Moves To Make Now If You’re Collecting Social Security in 2025
Written by
Vance Cariaga
Edited by
Molly Sullivan
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Signing up for Social Security retirement benefits is a major step that can have a deep and lasting impact on your finances. The amount of your monthly payment could swing by thousands of dollars simply based on the age you file. That’s something to keep in mind if you plan to start collecting Social Security next year.
If you’ve already decided to start collecting in 2025 regardless of your age, here are four money moves you should make right now.
Develop a Retirement Budget
You don’t have to be retired to collect Social Security, and many Americans continue working after signing up. But if you’re already retired or plan to retire when you start collecting Social Security, you’ll need to budget for a fixed income that doesn’t include work bonuses or raises. Here are some things to consider when preparing your retirement budget, according to Charles Schwab:
- List mandatory expenses. These include costs such as housing, utilities, taxes and groceries. In some cases, your mandatory costs might go up in retirement — like healthcare — while in others, they will go down or disappear altogether, like commuting to and from work. If you carry a lot of debt, consider using part of your savings to pay it down or eliminate it altogether, so you don’t enter retirement with a heavy debt load.
- List discretionary expenses. Discretionary expenses in retirement typically include travel, helping your kids and grandkids out financially, taking up a new hobby or giving more money to charity. Your budget will determine how much money you can allocate to discretionary expenses every month.
- List your income sources. Most retirees get income from two main sources: Social Security benefits and private retirement plans, such as 401(k) plans, IRAs and pensions. However, you might also have income from investments, side hustles and other sources. Be sure to add up all income sources and how much you expect to get from them each month.
Double-Check Your Expected Social Security Benefits
If you haven’t done so already, you’ll need to open a my Social Security account to apply for retirement benefits. You’ll be asked to provide some basic information, such as your name, address, birthdate and Social Security number. Before applying for benefits, check to see what your monthly payment will be based on your work history, age, which month you want to start collecting and spousal benefit status.
Be sure to check your annual earnings carefully to make sure they are accurate. Your 35 highest-earning years will determine your monthly Social Security payment. If something looks wrong, contact the Social Security Administration (SSA). Also, double-check to make sure your expected benefits look accurate based on your earnings.
Determine If You Will Have To Pay Taxes on Income
You can still earn outside income while collecting Social Security — known as provisional income — but you might face reduced benefits depending on your age and income.
For single filers who have not yet reached full retirement age, benefits aren’t taxed if your provisional income is less than $25,000. That rises to $32,000 if you’re married and filing a joint return.
Up to half of your Social Security benefits might be taxable if your provisional income is $25,000 to $34,000 for single filers, or $32,000 to $44,000 for joint filers. For anything above those income levels, up to 85% of your benefits could be taxable.
If you are past full retirement age when you begin collecting Social Security in 2025, you don’t have to worry on your benefits being taxed.
Review Your Retirement Savings
This is something you should be doing anyway, but it never hurts to double-check your 401(k), IRA and other retirement accounts, so you know exactly how much you’ll have available. Since you can’t collect Social Security until age 62, you will have already passed the age — 59 ½ — when you can begin making 401(k) and IRA withdrawals with no penalty.
That doesn’t necessarily mean you have to begin taking distributions immediately. You aren’t required to make withdrawals until you hit the required minimum distribution (RMD) age. According to the IRS, you “generally” must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA and retirement plan accounts when you reach age 72, or 73 if you reach age 72 after Dec. 31, 2022.
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