If you’re like most Americans, Social Security probably plays a big role in your financial future. Whether it’s a core part of your retirement plan or just a backup safety net, it’s more than just a government program—it’s peace of mind. But here’s the thing: changes are on the horizon, and you’ll want to understand what’s happening before it sneaks up on you.
The system itself isn’t going anywhere, but the way benefits are calculated, distributed, and taxed is always evolving. Let’s break down what’s coming, what it might mean for you, and what steps you can take to prepare.
Is Social Security Running Out of Money?
You’ve probably heard the headlines—“Social Security will be insolvent by 2034!”—but don’t panic just yet. Here’s what that actually means.
The Social Security Trust Fund, which helps pay for benefits when payroll taxes don’t cover everything, is indeed projected to run low. But “insolvent” doesn’t mean bankrupt. Even if the fund is depleted, ongoing payroll taxes are still expected to cover about 78% of benefits. That’s not ideal, of course, but it’s a far cry from zero.
Additionally, a big driver of these concerns is the fact that the number of retirees is growing faster than the number of workers contributing to the system. With people living longer and birth rates declining, it’s putting more strain on Social Security than ever before.
So, should you be worried? Maybe. Should you be informed? Definitely.
Changes on the Horizon
While no one has a crystal ball, a few changes to Social Security seem likely in the near future. Here are some of the key possibilities experts are discussing:
- The 2025 COLA (Cost-of-Living Adjustment)
If you’ve already begun collecting Social Security, you’ll see a 2.5% increase in your monthly benefits starting in January 2025. While this is smaller than the 3.2% adjustment in 2024, it’s still a reflection of a stabilizing economy with lower inflation.
This smaller COLA underscores the importance of budgeting carefully for the new year. Even though the increase is smaller, it’s still a positive sign that the economy is trending in the right direction. Take some time to create a 2025 budget that aligns with this change to avoid surprises when managing your expenses. - Reduced Benefits if You’re Still Working
If you’re collecting benefits and haven’t reached your full retirement age (FRA), your benefits might be temporarily reduced if you’re still working. For 2025, benefits will be reduced by $1 for every $2 earned above $23,400. However, if you’ll reach FRA in 2025, you can earn up to $62,160 without reductions.
The good news? These reductions are temporary. Once you hit FRA, your benefits will be recalculated to account for what was withheld, and you’ll receive higher payments moving forward. - Higher Earnings Subject to Social Security Tax
For those still working, the amount of your income subject to Social Security tax is increasing in 2025. Earnings up to $176,100 will now be taxed, up from $160,200 in 2023. Depending on your income level, this could mean paying more into the system.
Additionally, check your state laws regarding Social Security taxation. Some states tax benefits while others don’t, which could impact your total monthly income.
What Can You Do to Prepare?
All these changes sound like a lot, right? The good news is, there are practical steps you can take to safeguard your retirement, no matter what happens.
- Know Your Numbers
Do you know what your estimated benefit will be? If not, head to the Social Security Administration’s website and create a My Social Security account. It’s free, and you’ll get a personalized estimate based on your earnings record. Understanding your projected benefits is the first step toward creating a solid plan. - Diversify Your Retirement Income
Relying solely on Social Security is risky, especially with potential changes looming. Consider contributing to a 401(k), IRA, or other investment accounts to build a more robust retirement plan. If you’re an entrepreneur or small business owner, setting up a SEP IRA or Solo 401(k) could be a game-changer. - Delay Benefits if You Can
Here’s the math: for every year you delay taking Social Security past your full retirement age (up to age 70), your benefit increases by about 8%. If you can afford to wait, it’s often worth it. For example, if you’re eligible for $2,000 a month at 67, waiting until 70 could boost that to about $2,480. Over a 20-year retirement, that’s a big difference. - Consult a Financial Planner
Social Security is just one piece of the puzzle. A financial planner can help you see the bigger picture and make smart decisions about timing, taxes, and long-term strategy. For instance, they might help you determine how to optimize withdrawals from other retirement accounts while balancing your Social Security benefits.
The Emotional Side of Retirement
Let’s pause for a moment—because retirement isn’t just about numbers. It’s about peace of mind. It’s about knowing you’ll have enough to live comfortably and take care of your family. It’s also about flexibility—being able to travel, spend time with loved ones, or just enjoy your hobbies without constantly worrying about money.
Changes to Social Security can feel overwhelming, but here’s the thing: knowledge is power. The more you understand, the more control you’ll feel over your future.
The Bottom Line
Social Security is evolving, but it’s not disappearing. Yes, there are challenges ahead, but there are also plenty of tools, strategies, and resources to help you navigate them.
Want to talk through your options? At Suttle Crossland, we’re here to help you make sense of it all—from Social Security to the broader picture of your financial life.
Because at the end of the day (whoops, did I just say that?), it’s about creating a plan that works for you. And that’s something we’re pretty passionate about.
Ready to get started? Let’s chat.