If you're a retiree or planning to retire soon, understanding upcoming changes to Social Security and tax laws can help you make smarter financial decisions. In 2025, several important adjustments are coming that could impact your retirement income, taxes, and overall financial plan.
In this post, we'll cover eight key changes you should be aware of — including updates to Social Security benefits, Medicare premiums, tax brackets, and more.
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The 2025 COLA increase for Social Security is set at 2.5%, bringing the average monthly benefit from $1,927 to $1,976.
While this is the lowest increase in four years, it reflects cooling inflation rates returning closer to pre-pandemic levels.
Important Note:
Despite the increase in benefits, the Social Security tax brackets remain unchanged — meaning more of your benefits could be taxed if your income exceeds certain thresholds.
The repeal of these two provisions is significant news for retirees who worked in both the private and public sectors.
Previously, individuals who received a government pension (such as teachers, firefighters, or public service workers) often saw their Social Security benefits reduced. With this repeal:
Medicare Part B premiums are rising from $174 per month in 2024 to $185 per month in 2025.
Since these premiums are automatically deducted from Social Security payments, this increase will slightly offset the 2.5% COLA adjustment.
If you're a higher-income retiree, you'll want to be aware of the Income Related Monthly Adjustment Amount (IRMAA) charges.
In 2025, nine states are reducing or eliminating certain state income taxes.
One major change is in New Hampshire, which will no longer impose a state tax on dividends and interest. This means New Hampshire joins eight other states that have no state income tax at all.
If you're considering relocating in retirement, this could be an opportunity to reduce your tax burden.
The standard deduction is rising in 2025, offering some relief for taxpayers:
If you're over age 65, you'll receive an additional $1,000 per spouse to further reduce your taxable income.
A higher standard deduction means you'll pay taxes on less income, helping retirees manage their tax liability more effectively.
Starting in 2025, if you turn age 73, you'll need to begin taking RMDs from your pre-tax retirement accounts, such as:
This new RMD age reflects recent legislation designed to give retirees more flexibility in managing their retirement savings.
If you have large pre-tax balances and are not yet at RMD age, consider Roth conversions to reduce future RMDs and potentially lower your lifetime tax bill.
If you're still working and saving for retirement, contribution limits are increasing for 401(k) and other employer-sponsored retirement plans.
This enhanced catch-up amount only applies if you're still age 63 or younger by December 31, 2025. If you turn 64 at any point during the year, your catch-up limit remains $7,500.
As happens most years, the income tax brackets and long-term capital gains tax brackets will be adjusted for inflation in 2025.
This is especially beneficial for retirees utilizing:
For example, the 0% long-term capital gains bracket now extends up to $96,700 for married couples filing jointly — meaning you can sell investments at a 0% tax rate if your income stays within this range.
With these upcoming shifts in Social Security benefits, Medicare premiums, and tax rules, now is the time to:
✅ Review your retirement income plan to adjust for Social Security increases and Medicare costs.
✅ Consider Roth conversions or other strategies to reduce future RMDs and Medicare IRMAA surcharges.
✅ Evaluate if relocating to a lower-tax state could improve your retirement cash flow.
✅ Maximize your 401(k) contributions — especially if you're in the 60-63 age range for the enhanced catch-up limit.
✅ Use the higher standard deduction to reduce your taxable income.
Staying informed about changes to retirement, taxes, and Social Security is key to protecting your financial future.
If you’d like a downloadable 2025 Tax & Retirement Cheat Sheet with these key numbers at your fingertips, you can grab it here.
If you’re looking for personalized guidance on your retirement plan, feel free to reach out — I'd be happy to help.
For more insights on building a confident and tax-efficient retirement plan, consider subscribing to my YouTube channel for weekly videos.
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