4 Mistakes You Must Not Make If You’re Claiming Social Security in 2025
If you’re planning on retiring and claiming Social Security in 2025, congratulations! You’ll finally be reaping some of the rewards of a lifetime of working hard and paying your Social Security taxes.
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But although you might feel like you can simply file for Social Security and ride off into the sunset, the truth is that there’s much more to the process. By planning ahead, you can not only avoid making potentially serious mistakes, but you can also ensure that you’re receiving the maximum benefits that you can.
Here are some of the missteps you’ll want to avoid if you’re claiming Social Security in 2025.
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Not Understanding FRA
Full retirement age (FRA) is an important concept when it comes to Social Security. Although you can claim your benefits as early as age 62, full retirement age, as the name implies, is when you earn your full Social Security benefit. If you claim your benefits before FRA, they will be permanently reduced for the rest of your life.
But whereas full retirement age is 67 for those born in 1960 or later, if you’re 66 in 2025, full retirement age is 66 years and 10 months. This is two months later than in 2024, which is an important change.
For example, if you aren’t aware of this change and plan on claiming benefits at age 66 years and 8 months in 2025, you’ll technically be filing early. This means you’ll forever be locking in a lower monthly payout.
Although the reduction will be small, as you’re only filing 2 months early, you’ll still drop your check by 1.11% forever. For the average monthly Social Security check, which was $1,918.28 for retired workers as of June 2024, that would amount to a reduction of $21.10 every month.
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Expecting a Huge COLA
Every year, the Social Security Administration (SSA) evaluates benefits and typically raises them in line with inflation so that beneficiaries don’t experience a loss in purchasing power.
In 2023, when inflation was at its highest levels in 40 years, the cost-of-living adjustment was a whopping 8.7%. For 2024, when inflation was on its way down, the COLA dropped to 3.2%. But inflation has continued to fall in 2024, and the COLA for 2025 — which will be announced in October — is expected to be even lower, perhaps in the 2.7% range.
While still high based on recent history, the days of COLAs approaching double digits are clearly over. If you were hoping for another huge increase in the year that you file for benefits, you might have to temper your expectations.
Overlooking Spousal Benefits
When you file for Social Security benefits, you’re entitled to the highest benefit possible based on either your own personal work record or that of your spouse. However, the spousal benefit is limited to 50% of the amount the prime beneficiary is receiving.
In other words, if your spouse receives a Social Security check of $2,000 per month, your maximum spousal benefit is $1,000. If this is more than you would receive based on your own work record, then you can still claim this benefit, even if you never worked a day in your life.
If you file in 2025, it’s important to check which benefit gives you the biggest paycheck.
Relying on Social Security
Imagine that the average Social Security retirement benefit of $1,918.28 rises by 2.7% next year to $1,970.07. That still only amounts to $23,640.84 per year, far from the level that most seniors would desire for a happy retirement.
If you’re already planning to retire next year, you won’t really have a lot of time to build up your other savings to supplement your Social Security payout. But you could make some life changes to prepare for the fact that Social Security alone won’t likely fund your dream retirement.
For example, during your last year before retirement, you could absolutely max out your retirement plans and at least get a small head start before you draw your first Social Security check.
For 2024, you can sock away up to $30,500 into a 401(k) plan since you’re over 50 years old. If you have an IRA, the limit for those 50 and older is $8,000. These amounts alone won’t fully fund a 30-year retirement, but they’re a big step in the right direction.
Another way to boost your retirement earnings instead of relying solely on Social Security is to consider a part-time job or side gig after you formally retire. This doesn’t have to be something burdensome. In fact, many seniors enjoy working a few hours a week doing something they love, all the while earning additional money for retirement.
If neither of those options is feasible for you, it’s important to acknowledge that you’ll likely have to downsize or otherwise trim expenses in retirement if you’re planning to rely on Social Security. With approximately one year of lead time, however, you should be able to start making adjustments so that you’re ready when you claim Social Security in 2025.
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This article originally appeared on GOBankingRates.com: 4 Mistakes You Must Not Make If You’re Claiming Social Security in 2025