In the ever-evolving world of estate planning, staying informed about financial adjustments is essential. For those who depend on Social Security benefits or Supplemental Security Income (SSI), the Social Security Administration (SSA) has announced the 2025 cost of living adjustment (COLA), which could play a pivotal role in your financial planning.
At Axis Estate Planning, we aim to keep our clients updated on changes that may influence their estate and legacy strategies. The 2025 COLA can be a valuable consideration as you assess financial security for both you and your beneficiaries.
What’s New with the 2025 COLA?
To help Social Security benefits keep up with inflation, the SSA has approved a 2.5% increase in benefits for 2025. This equates to an average increase of approximately $50 per month. Although lower than the 3.2% increase in 2024 and the significant 8.7% adjustment in 2023, this smaller COLA suggests that inflation may be stabilizing—an important trend to note in long-term financial planning.
Additional Changes That Could Affect Your Estate Planning
In addition to the COLA, there are a few other updates that may be relevant to your estate planning approach:
- Medicare Part B Premiums
Starting in 2025, Medicare Part B premiums will increase from $174.70 to $185.00 per month. For those relying on Medicare for healthcare coverage, budgeting for this change can be crucial for a balanced financial plan. - Medicare Part D Out-of-Pocket Cap
For those with prescription drug expenses, Medicare Part D will introduce an out-of-pocket maximum of $2,000 in 2025. This cap can add a level of predictability to healthcare costs, which may support your retirement and estate strategies. - Social Security Tax Cap Increase
The Social Security tax cap is rising to $176,100, up from $168,600 in 2024. For higher-income beneficiaries, this change can affect tax planning, potentially impacting your wealth distribution and estate tax considerations.
How These Updates Fit into Your Estate Plan
These adjustments are not only essential for your current financial planning but also for crafting an estate plan that provides lasting security for your loved ones. Here’s how Axis Estate Planning can guide you in aligning your estate plan with these changes:
- Budgeting for Healthcare and Living Expenses
With updated Medicare premiums and a new prescription drug cap, understanding and planning for healthcare costs can help secure your financial resources, ensuring they align with your estate objectives. - Tax Planning and Wealth Distribution
The Social Security tax cap increase may impact how you approach estate taxes and wealth distribution, particularly if you or your beneficiaries fall into higher income brackets. By factoring in these adjustments, we can help you refine your strategies for a smoother wealth transfer. - Investment and Income Planning
As COLA increases fluctuate, reviewing your investment and income strategies is crucial. Our team can help you adapt to changing inflation rates, ensuring that your legacy remains resilient over time.
Your Financial Legacy is Our Priority
Understanding and responding to these updates can empower you to make informed decisions, reinforcing both your immediate financial security and your long-term estate goals. At Axis Estate Planning, we’re here to help you navigate these changes and integrate them into a comprehensive estate plan that supports your legacy and secures your family’s future. Contact us today to discuss how these updates may fit into your estate planning strategy.
