Key Points

• The One Big, Beautiful Bill (OBBB) added a new $6,000 senior tax deduction.

• This will help many -- but not all -- seniors on Social Security save money on taxes.

• It's a far cry from the savings that would come from actually ending Social Security benefit taxes.

• The $23,760 Social Security bonus most retirees completely overlook ›

"Promises made, promises kept." That's how a recent White House article celebrated the One Big, Beautiful Bill's (OBBB) new senior tax deduction, set to take effect for the 2025 tax year. The Trump administration has claimed that, as a result of this change, 88% of seniors on Social Security won't owe any taxes on their Social Security benefits -- a follow-through on one of President Donald Trump's biggest campaign promises.

It certainly sounds compelling, but as someone who's been writing about Social Security for years, it only took me one look at the data to realize that the OBBB change was far from an end to benefit taxes. The new deduction will help many seniors to a degree, but you need to understand what it is -- and isn't -- to know what kind of a difference it will make for you.

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How the OBBB senior tax deduction works

The OBBB added a new $6,000 tax deduction for seniors 65 and older ($12,000 for married couples). This is on top of the standard deduction for their filing status, which the law also increased from $15,000 to $15,750 for single adults and from $30,000 to $31,500 for married couples, and the existing senior tax deduction ($2,000 for an individual or $1,600 per qualifying individual for a married couple).

Tax deductions reduce the portion of your income you have to pay taxes on. For example, if you earned $50,000 this year and qualified for $15,000 in tax deductions, you'd only owe taxes on the remaining $35,000. So the OBBB change is definitely useful. It means you'll owe taxes on less money than you did before.

That said, not everyone will be able to take advantage of this new deduction. Single adults with incomes over $75,000 and married couples with incomes over $150,000 will see their deduction decrease by $60 for every $1,000 by which their income exceeds these thresholds. Single adults with incomes greater than $175,000 and married couples with incomes exceeding $250,000 won't be able to claim the new deduction at all.

So far, we can already see two key differences between the OBBB senior deduction and Trump's promise to end benefit taxes. Seniors under 65 receive no benefit from the OBBB deduction, even if they're on Social Security, and high earners who would have benefited from ending benefit taxes will experience no gains from this new change. But there's another big distinction to be made between Trump's promise and what he delivered.

The tax savings fall far short of what Trump promised

The OBBB senior tax deduction will give the average senior about $670 more in after-tax income, according to a Council for Economic Advisors report. But that's a far cry from the gains that would come from ending the benefit taxes that are still on the books, even after the OBBB's passing.

Let's look at the example of a single 65-year-old who takes $50,000 from a 401(k) in 2025 and has annual Social Security benefits of $24,000. The government decides what percentage of your Social Security benefits to tax by looking at your provisional income -- your adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit. In this case, that's $62,000.

Then, it compares this amount to the following chart.

Data source: Social Security Administration.

Under Social Security benefit tax rules, 85% of their benefits would be taxable and get added to their AGI, bringing it to $70,400. So what does this mean for their taxes?

The following table outlines this person's tax bill under pre-OBBB law, with the new OBBB standard and senior deductions in place, and in a scenario where the OBBB hadn't passed and benefit taxes were eliminated instead.

Source: Author's calculations.

In this example, the OBBB senior deduction and the increase to the standard deduction for all single filers would result in $1,302.50 in tax savings. However, eliminating Social Security benefit taxes would've saved $2,940.50 in taxes, even without the new deductions in place.

So the Council of Economic Advisors' claim that 88% of seniors on Social Security won't pay any benefit taxes isn't accurate. The report says this is a result of "their total deductions exceeding their taxable Social Security benefits." But if we follow this logic, we could say that single filers who had $16,550 or less in taxable Social Security benefits in 2024 (equal to the $14,600 standard deduction for single filers plus the $1,950 senior deduction that year) didn't pay taxes on their Social Security benefits, when we know that's not true. If you have taxable Social Security benefits, you are paying taxes on them.

The OBBB didn't do anything to change how benefit taxation works. An increasing number of seniors will encounter this tax as average benefits and living costs continue to rise. The OBBB's new senior deduction may provide a bit of relief, but it's a small gain compared to Trump's initial promise.

It's also, for the moment, a limited-time offer. The law says it only applies until the 2028 tax year. Congress will have to decide whether to extend it for future years.

Whether the government will actually end benefit taxes remains an open question. Many seniors want it to do so, but with Social Security facing insolvency, the program could really use the benefit tax revenue right now. However, if Congress makes broader changes to the program in the next few years to keep it sustainable for future generations, talk of ending benefit taxes may resurface.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

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Key Points

• Claiming early reduces your own retirement benefit, but it will not affect your partner's spousal benefit.

• If your partner claims early, that can reduce their spousal benefit by up to 35%.

• Claiming early can reduce the survivor benefit your partner is entitled to after you die.

• The $23,760 Social Security bonus most retirees completely overlook ›

You're nearing 62 and you're chomping at the bit to sign up for Social Security. You're ready to get back some of the money you've put into the program, and you want as many checks as possible. There's just one thing holding you back.

You're married, and you don't want your decision to hurt the spousal benefit your partner qualifies for. It's a natural thing to worry about, since claiming early can reduce the size of your own retirement benefit by up to 30%. You're right in thinking that your choices affect your spouse's benefits, but they may not do so in the way you expect.

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Image source: Getty Images.

How spousal Social Security benefits work

To qualify for a spousal benefit, you must be married to a qualifying worker -- that is, one who has worked long enough to earn 40 credits. One credit is defined as $1,810 in earnings in 2025, and you can earn up to four credits per year. There's generally a one-year length of marriage rule, though that's waived if you were already eligible for Social Security in the month before the month you got married, or if you're the parent of your spouse's child.

A spousal benefit is worth up to one-half of the retirement benefit the worker qualifies for at their full retirement age (FRA). Your FRA depends on your birth year, but it's 67 for most adults today. As mentioned above, if you claim retirement benefits early, you could shrink your checks up to 30%. But your claiming age has no bearing on the size of your partner's spousal benefit.

Your spouse's claiming age does matter, though. To qualify for the maximum spousal benefit, they must wait until they reach their own FRA to apply. Claiming early reduces their checks by 25/36 of 1% per month for up to 36 months, and then by 5/12 of 1% per month thereafter. That can drop their checks by 35%.

If a retired worker qualifies for a $2,000 monthly benefit at their FRA, that means their partner's maximum spousal benefit is $1,000 at their own FRA. If the spouse claims immediately at 62, they would only get $650 per check if their FRA is 67. This reduction is permanent.

It's worth pointing out that your partner may not get a spousal benefit even if they qualify for one. When their own retirement benefit is larger than their spousal benefit, the government pays them the retirement benefit instead. You cannot claim both benefits at once.

How your Social Security decisions affect your spouse

While your choice to claim Social Security early may not directly harm your partner's spousal benefit, it will affect them in a few ways. First, it allows them to apply for spousal benefits earlier. They must wait until you apply for Social Security before they can claim a spousal benefit.

Second, claiming early reduces the survivor benefit your partner qualifies for after you pass away. For this reason, some people choose to delay Social Security, or avoid claiming altogether if they're in poor health and believe their spouse will be heavily dependent upon Social Security to make ends meet.

But ultimately, when you sign up for Social Security is a personal decision, one that's best talked through with your spouse. When you work together, you can coordinate your claiming strategy to take home the largest household benefits.

Sometimes, this involves the lower-earning spouse claiming their own retirement benefit, assuming they qualify for one, early. This helps the higher-earning spouse to delay benefits until their FRA or even later. You continue to grow your checks for every month you delay benefits until you turn 70. Then, when the higher earner applies for benefits, the lower earner can switch to a spousal benefit if it's worth more than what they're currently receiving.

You can estimate your own retirement benefit and your spousal benefit through your my Social Security account. You can set one of these up for free in a few minutes. Have your spouse do this as well. There's a tool in your account that can help you figure out what kind of spousal and retirement benefit you'll qualify for at every possible claiming age.

Use this information to start a conversation with your partner about when each of you wants to apply for Social Security. But stay open to changing your plan, if necessary, as you get closer to signing up.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• The FIRE movement requires aggressive saving and present-day sacrifices to achieve early retirement.

• Most forms of FIRE involve saving at least 50% of your income each year.

• There are more flexible options that require smaller savings targets.

• The $23,760 Social Security bonus most retirees completely overlook ›

If you've done any research into early retirement strategies, there's a good chance you've come across the Financial Independence, Retire Early (FIRE) movement. It's been gaining steam over the last few decades, promising retirement in your 40s or even your 30s if you're willing to work hard and save aggressively.

But as the movement has grown, it's also splintered into different groups pursuing slightly different goals. Understanding these differences is the first step to figuring out which, if any, make sense for you. Here are the four most common types around today.

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Image source: Getty Images.

1. Lean FIRE

Lean FIRE involves retiring on a modest income, often about $40,000 or less, adjusted for inflation. Like all forms of FIRE, it requires aggressive saving -- often 50% or more of your annual income -- throughout your working years. But because of its low annual retirement expenses, it's easier to achieve your lean FIRE number (your savings target) than it is with other FIRE subsets.

Lean FIRE may not appeal to you if you aren't comfortable making sacrifices over the long term. It's common for all FIRE adherents to live frugally while they try to save for retirement. But lean FIRE carries this frugality through the rest of your life.

This could become problematic for some, especially if you have a lot of unplanned expenses in retirement. You'll need a backup plan for what you'll do if you find you're draining your savings faster than expected.

2. Fat FIRE

Fat FIRE is the opposite of lean FIRE. It usually involves high annual expenses in retirement -- often $100,000 or more. This could be a better fit for you if you want a more luxurious lifestyle in retirement. It also gives you more cushion in case of unexpected expenses. You can always scale back your discretionary spending a little while still covering the basics.

The big problem with fat FIRE is that it requires a much higher FIRE number. A general rule for all types of FIRE is to save 25 to 33 times your annual expenses. That could be as much as $3.3 million for someone who hopes to spend $100,000 per year. It takes time to save that much, even if you can set aside half your income. You may not be able to retire as early as you could if you opted for one of the other FIRE types listed here.

Or you might have to make even greater sacrifices in the present. Some fat FIRE adherents save 75% of their annual income for retirement. That could seriously reduce the money left over for covering your living expenses today, and it might not be feasible for you.

3. Barista FIRE

Barista FIRE is an alternative to lean FIRE for those who want to retire early but are worried about draining their savings too quickly. With this strategy, you plan to work a flexible job, like being a barista, even after you retire. This way, you have a steady paycheck to supplement your personal savings.

This also reduces your FIRE number and gives you something to fall back on if unexpected expenses come up. You can always pick up a few extra shifts if need be until you've gotten your budget back on track. Some people enjoy the purpose and camaraderie that comes with having a job, too.

One thing to bear in mind, though, is that you may not be able to work forever. Sometimes, health or family caretaking issues force people to leave the workforce, whether they want to or not. So it doesn't hurt to have a little extra stashed away in case you aren't able to continue working as planned.

4. Coast FIRE

If you're skeptical about saving enough money to last 40 or more years of retirement, coast FIRE could be the right choice for you. This approach doesn't actually involve retiring early. You retire at a more typical age -- often your early to mid-60s -- but you get your saving out of the way as quickly as possible.

A significant chunk of your retirement savings often comes from investment earnings. Funds you contribute early on in your career often wind up being worth the most in the end because they're invested the longest and have the most time to grow.

With coast FIRE, you take advantage of this by saving up to a certain target. Then, you stop setting aside money and allow your savings to continue to grow until your retirement age. Once you've hit your coast FIRE number, you can scale back your hours in the workforce, possibly dropping to part-time.

This strategy involves making certain assumptions about how quickly your retirement savings will grow. It's important not to be too optimistic here. Plan for about a 6% average annual return, just to be safe.

If your investments grow more quickly, that's great, and you may be able to retire earlier than planned. If not, your plan won't be derailed.

It's OK if FIRE isn't right for you

It's also possible that none of the FIRE options mentioned feel like the right fit for you, and that's fine. FIRE isn't something that's appealing or feasible to everyone, and it's not necessary to enjoy a comfortable retirement.

A common rule of thumb is to save 15% of your income for retirement. This assumes you plan to retire at a more traditional retirement age. If you're able to do a little more than that without making too many sacrifices in the present, that might be a more sustainable path for you.

The most important thing is to find a plan that you can stick with. You don't want to burn out and save 50% of your income one year and nothing for the next five. Figure out what feels comfortable for you, and begin with that. Then, if you feel you can increase your savings rate a little down the road, you can give it a shot.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• The IRS eventually comes looking for the tax revenue it didn't get to collect earlier on the money invested within IRAs and other tax-deferred accounts.

• Just because you withdraw money from a tax-sheltered retirement account doesn’t mean it can’t continue providing value, or continue growing.

• There's a financial maneuver that can help negate your need to make future RMDs.

• The $23,760 Social Security bonus most retirees completely overlook ›

Are you going to be 73 years old (or older) at any point in 2025? If so, whether or not you need it -- or even want it -- you will be legally required to start taking money out of most types of tax-deferred retirement accounts you may own. These withdrawals are called required minimum distributions, in fact, or RMDs -- and failing to make those taxable withdrawals each year before the annual deadline can result in decent-sized penalties.

Don't stress out if you just don't need this cash at this time, though. While you can't refuse to withdraw it, you can still do constructive things with it outside of your IRA. Here's a review of your four best options.

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But first things first.

What's an RMD?

If you've already been through your first required minimum distribution, then 2025's RMD isn't your first rodeo. If you're unfamiliar with them, though, here's the deal.

All the money that's been growing tax-free inside your (non-Roth) IRA, 401(k), or similar account? The IRS eventually wants its cut. The federal government's revenue-collection arm figures that 73 years of age is about as late in life as it wants to let you keep this money completely untaxed. And once you start, you'll take these required minimum distributions every year for the rest of your life.

But what's the minimum? It varies with your age. When you're 73, you'll only need to withdraw about 3.77% of your retirement account's value as of the end of the prior year. The proportion gets progressively larger as you age, though, reaching 50% of the prior year's closing value at the rarely seen age of 120. Your brokerage firm or your account's custodian will supply you with the information needed to determine your RMD, and in many cases can figure it out for you. Otherwise, refer to the IRS for instructions.

Image source: Getty Images.

If you own more than one retirement account, that's OK. You can mix and match your withdrawals from the same kinds of retirement accounts to come up with a sum-total RMD figure, and then make the withdrawal from just one of these accounts, or portions from each. The IRS only cares about the total amount it's owed -- not where the money comes from. However, you can't mix and match among different kinds of retirement accounts, like a 403(b) and a traditional IRA. Both of them do have RMDs, but you'll have to handle each category separately. You can only combine like-categorized retirement accounts for RMD calculation and withdrawal purposes.

There's one exception to this: 401(k) accounts. If you happen to have more than one 401(k), you need to take your calculated RMD for each one from that one.

As for timing, your very first required minimum distribution doesn't need to be completed until April 1 of the year after you turn 73. Past that point, these withdrawals are supposed to be completed by the end of the calendar tax year. That means if you wait to make your first one, you may end up taking two years' worth of RMDs in the year you turn 74.

Options

Suppose you don't actually need all of that money in that year, though. No problem. While you'll still need to make these withdrawals, there are several options for what you may want to do with the cash influx, some of them specific to IRAs.

1. Give it away (tax efficiently)

You can always give money to charitable causes. And, while there are limits, donations to legitimate charities are at least somewhat tax-deductible.

If you're over 70 and a half and are willing to transfer cash or assets directly from your IRA to a charity, though, tax-deductibility limits are much higher. Specifically, by categorizing your RMD as a qualified charitable distribution (or QCD), you can take as much as $108,000 worth of an IRA distribution that would have been considered your taxable income (or up to $216,00 for a married couple) and directly transfer it to a charitable cause -- and that maneuver will still satisfy your minimum distribution requirement. You can't do this with 401(k)s or similar accounts. Contact the charity in question for instructions on how they can receive this gift, and then confirm it for your record-keeping and documentation purposes.

2. Tuck it away for a rainy day

Just because you don't need this money right now doesn't necessarily mean you want to get rid of it altogether, of course. The day may well come when you do need it.

If that's the case, leaving a sizable wad of cash in a checking or savings account is an option, but arguably not your best one. These accounts pay little to no interest. If you're willing to make a minimal amount of effort to shop around, you can find a high-yield money market fund you like instead. Such accounts are currently paying in the ballpark of 4%, and almost all brokerage firms and most online banks offer them.

Now, moving money into and out of such funds involves buying and selling just like an ordinary mutual fund. So, to convert that money back to something liquid and cash-like will take one full business day. It's certainly worth the trouble, though, for a good interest rate on the kind of money you're likely to be reallocating with an RMD.

3. Invest it -- or reinvest it -- with its new taxable status in mind

Most people slated to collect a required minimum distribution who don't actually need the money at that time are likely just going to reinvest it.

However, if you're only going to repurchase the same investments you sold to facilitate the RMD, you need not bother. You can simply request a transfer of assets from an IRA and into an ordinary brokerage account. Just instruct your broker/custodian to do what's called an in-kind transfer. It may take an extra day or two to complete, but you'll still get a precise distribution value figure for the day the transfer was officially done.

That being said, while you're moving things around anyway, you might want to use the opportunity to make some smart changes to your portfolio. Just consider the new taxable status for any freed-up money or assets. Nothing that ever happened within your IRA was a taxable event. Now, everything this money could become presents a potential tax liability. If you want to keep your tax bill to a minimum, you probably won't want to invest your entire RMD in dividend stocks. While they're riskier, buy-and-hold growth stocks are also rather tax-efficient.

4. Start saving for a Roth conversion

Finally, if you know taking taxable withdrawals out of your retirement account every year is going to be more of a drag than you care to deal with, you've always got the option of converting an ordinary IRA into a Roth IRA -- Roths aren't subject to RMDs.

The downside to this move is that when you convert money from an ordinary IRA into a Roth, all the taxes on this withdrawal come due at once. This can get expensive, especially if doing so bumps you into a higher tax bracket for the year. That's why many people who opt for Roth conversions perform them over the course of multiple years, completing the conversion in tranches, each of which is a relatively small income-taxable event. Assuming you'd rather not leave any money out of the newly converted (but still tax-deferring) Roth when you don't have to, you can cover this tax bill with other funds ... including your RMD money.

Just bear in mind that a Roth conversion doesn't satisfy your RMD for that year. And, paying taxes on one doesn't negate the tax bill for the other. Every year's required minimum distribution is already determined at the end of the prior year, and is owed whether you do a conversion that year or not. If you like this idea, you'll simply want to convert as much money as possible as quickly as possible to keep your RMDs -- and the number of years you must take them -- to their lowest-possible minimum.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• You don't need to start your Social Security benefits and IRA withdrawals at the same time.

• You may wish to work more years -- and so consider what kind of work you can reasonably do.

• Adding a few more years of wage-producing work could also bolster your calculated benefits.

• The $23,760 Social Security bonus most retirees completely overlook ›

You probably already know that postponing your Social Security retirement benefits will make your eventual payments bigger. Specifically, as things stand right now, for every month after reaching your official full retirement age (or FRA) that you wait to claim, your future payments grow to the tune of 2/3 of 1%. That's 8% per year, for a little more meaningful perspective, which isn't a bad little pay bump.

And the program will continue adding this credit every month you postpone your payments all the way until you turn 70. With the average monthly Social Security check now worth $1,976, waiting this long to file for benefits can mean a few hundred extra bucks per month. It's easier said than done, however. Life's realities -- like health issues or expenses -- can get in the way.

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With that as the backdrop, here's a look at three things you can do to help yourself delay claiming Social Security's retirement payments for as long as possible, beefing up the size of your checks once you do decide to initiate these well-earned benefits.

Start your IRA distributions before your Social Security payments

Many retirees begin collecting Social Security payments and start living on their retirement savings right after they retire. They often have to, in fact -- life requires it. Even if the mortgage is paid off, groceries must still be bought and utility bills need to be paid.

You're certainly not required to tap both sources of retirement income immediately after you stop earning a work-based income. If you only need one or the other, only utilize one and let the other continue growing for at least a little while longer.

But why not claim Social Security benefits first and let your retirement savings continue to grow in the interim? There's certainly a case to be made for this alternative. For instance, if health issues create a better-than-average chance of shortening your life span, you may be better served by collecting as much Social Security as you can while you can. In this same vein, when you initiate your Social Security benefits can potentially impact your spouse's Social Security income later in life.

Conversely, if you've got a sizable stash of money in an ordinary (non-Roth) IRA or 401(k), taking more but smaller taxable distributions from these accounts by starting withdrawals at a relatively early age might reduce your total lifetime tax bill resulting from these distributions. Withdrawals from retirement accounts are also flexible, meaning you can take more, or less, as needed.

That's not the case with Social Security. What you get is what you get, and with one time-limited exception, once you start collecting Social Security you don't have the choice of stopping.

Image source: Getty Images.

Unfortunately, the only way to know for sure which of these plans makes the most sense for you is by pulling out a pencil and paper and doing a side-by-side comparison. This will require a bit of data-gathering just to make sure you've got all the information you'll need to do the math. But it would be time well spent if you've feasibly got the option of only tapping one source or the other when starting your retirement.

Consider the practicalities of working for more years

That being said, if delaying Social Security benefits for as long as possible means you'll also need to work -- at least part time -- to make ends meet in the meantime, some strategic career planning may be in order. Namely, you'll want to make sure you're able to continue working past an age when many other people are calling it quits.

And it's not just a matter of making sure your age doesn't translate into health-related reasons for leaving the workplace, although this is certainly something to consider. (For example, handling heavy equipment, tools, and materials can take a sizable toll on an older body. If the option to move to a more administrative role materializes, take it.)

Later in your career also isn't a time to sacrifice job security for a chance to work at a start-up that might be out of business within a year, for instance. The point is, you want to give yourself the very best chance of continuing to work well past your earliest eligibility for Social Security benefits.

Make as much money as you (reasonably) can for at least 35 years

Finally, not only will holding off on the initiation of your Social Security benefits make your eventual payments bigger, but postponing these payments could also give you more time to pay more Social Security taxes that bolster your future benefit.

Many people may not realize it, but when the Social Security Administration determines how much it owes you in retirement benefits, it looks at your 35 highest-earning (adjusted for inflation) years. Not working a total of 35 years doesn't mean you won't get anything -- the Social Security Administration simply credits you zero dollars' worth of income for every year less than 35 that you worked.

This, of course, results in a smaller benefit. Even if you're not "maxing out" your taxable work-based income, though, something is better than nothing if you'd otherwise have fewer than 35 years' worth of taxable wages.

But what if you've already worked a full 35 years? There may still be an upside to continuing to work. If you happen to be earning relatively more now than you did earlier in your career, these higher-earning years will replace any lower-earning ones when Social Security determines which of your work years are your 35 best in terms of taxable work-based wages.

Of course, working for longer also allows you to tuck more away into a retirement savings account. Just be realistic. If you physically shouldn't continue to work or if you're miserable while you're working, don't do it. No amount of money is worth lowering your overall mental and physical well-being at any stage of your life.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

The offers and details on this page may have updated or changed since the time of publication. See our article on Business Insider for current information.

• My parents sold their home of 40 years and retired to Barranquilla, Colombia.
• They enjoyed 15 years there, but a diagnosis of Alzheimer's disease changed everything.
• Now they're back in in Houston, and I'm navigating their care and finances.

When my parents retired at 70, they both knew immediately where they wanted to go.

With its year-round temperatures of 80 to 90 degrees, peaceful blue waters and a welcoming and lively culture the seaside city of Barranquilla, Colombia, called to them. After all, my Colombian father would be going back to his homeland, and my Cuban mother relished in the Latin culture that seemed so fragmented in the U.S.

They sold their home of more than 40 years in Houston and purchased a two-story condo with a partial ocean view for $135,000 USD. Their social security and retirement money went a long way in Barranquilla, where the average cost of living is much lower than it is in the US.

The move was great, until it wasn't

In the beginning, their retirement life was idyllic. They enjoyed afternoon coffee with friends at sidewalk cafes, they walked along the beach every morning and they would attend parties in their condo development with fellow retirees.

But one day, while they were visiting my family in Texas, my mother stopped and stared at my younger son splashing away in the pool. "Who's that little boy?" she asked. I stared at her face, as she scrutinized my son, with his dark curls and almond brown eyes that looked like mine. "Ma, that's your grandson," I said.

That's when I knew something was terribly wrong. On another visit, my father would wander in the kitchen aimlessly, looking for the cabinet where we kept our water glasses, despite the fact that he had no problem finding them a year ago.

A trip to the neurologist confirmed what I had already suspected. They both had Alzheimer's disease.

We needed to make a plan

While the diagnosis for both of them was still early-stage, I knew what the future held. My grandmother (my mother's mother) and my mother's brother both had Alzheimer's. Worst yet, my father seemed to be progressing at an alarmingly rapid rate. Unfortunately, retiring on the Colombian coast would be a dream unfulfilled.

They decided to move back to Houston to be closer to family and their doctors. They agreed to sell their condo and move in with us temporarily until we could find a suitable assisted living apartment. But it's been tricky. Some days, they would say they were moving back to Barranquilla permanently. It was a constant flip-flop, but my husband and I made an executive decision to keep them in Houston.

They've been living with us since February. In that time, I've had to reset all their passwords because they couldn't remember them. I spend every morning scrambling to the kitchen to make sure I'm there to give them their medication, a routine they consistently forget.

The biggest challenge, though, has been navigating foreign laws. One thing I did early on was get a power of attorney and medical power of attorney. While those two documents have been incredibly helpful in the states, I'm not entirely sure the legal weight these documents may carry in Colombia. I'm currently looking for a lawyer and a real estate agent abroad who can help me with the sale of their condo. Once that's taken care of, I then have to sell all the stuff they've amassed in the 15 years they've lived there.

I'm planning for my own future, too

Perhaps the biggest lesson I've learned in all of this is to be prepared. I plan to sign up for long-term care insurance so my children won't have to stress over how they plan to pay for my care in the same way I have had to with my parents. I've been taking steps to improve my health and I'm also financially prepared for the inevitable — when my parents pass away. Right now, though, I'm going to relish the time I still have with them, here, close to my family.

Key Points

• Vanguard just released its "How America Saves 2025" report.

• It offers a comprehensive look at defined contribution plans administered by Vanguard, with a focus on what participants are actually doing with their money.

• If you want to know how your savings match up to your peers, this is the place to look.

• The $23,760 Social Security bonus most retirees completely overlook ›

Personal finance can be both simple and complex, with one of the biggest hurdles being on the emotional side of things. "Am I saving enough?" is one question many people end up asking themselves.

Vanguard just released its "How America Saves 2025" report, and it can help you answer that question. As one of the country's largest asset management companies, Vanguard has shared data based on the many defined contribution plans that it administers. The data offers a unique snapshot of the savings habits of many Americans, by age, income, industry, and more.

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There are several types of defined contribution plans captured in the report, but the 401(k) is by far the most common and makes up the bulk of the included data. Read on to understand how your 401(k) stacks up against your peers.

Image source: Getty Images.

How much money are Americans putting away?

One of the key statistics Vanguard provides in the report is the average plan participation rate by age. In 2024, across the 4.8 million accounts included in the report, those in the youngest age group -- 25 and below -- had the lowest participation rate and the lowest average account balances. However, the average participation rate rises very quickly with age before peaking and then dropping off as people enter retirement.

Data source: Vanguard.

This should come as no surprise as young workers are just beginning their careers. In fact, only 31% of those making $15,000 or less were enrolled in plans. But a full 95% of participants making $150,000 or more were enrolled.

At the low end of the income spectrum, automatic enrollment played a huge role in participation rate. Voluntary enrollment was just 14% for those making $15,000 or less a year, while plans with automatic enrollment increased that figure to 77%. This trend remained in place through all of the age brackets, though higher earners were far more likely to voluntarily enroll than those with lower wages.

And all of this has a big impact on the amount that participants save. Younger workers generally had smaller balances than older workers. This dynamic did not change until retirement age (65 and older) as plan participants begin withdrawing from their accounts.

The average or the median?

Before digging into actual account balances across age groups, it's important to understand the difference between average and median figures.

An average takes all of the numbers in a group, adds them up, and divides the sum by the count of numbers in the group. However, this calculation can be skewed by extreme outliers. For example, if you have a stadium full of people with a net worth between $50,000 and $100,000 but drop Bill Gates into the crowd, the average would skyrocket well above $100,000 because of Gates' massive wealth.

This is where a median can be helpful. It represents the middle value of all the numbers in question (after sorting from smallest to largest). In other words, the median is the value below which and above which half of the numbers in a group lie.

With that context, here are the balances for the defined contribution plans in the Vanguard report:

Data source: Vanguard.

You can see the big difference between average and median values across every age bracket. You can also see how balances tend to increase with age.

If you don't match up, take a deep breath

Some savers will see this data and pat themselves on the back for matching or beating the numbers in the table. Others may feel a pang of concern because they're behind for their age. For those in the latter, don't let that fact get you down. Saving and investing is a journey; give yourself a little leeway.

For starters, these are defined contribution plans, which may not reflect all of someone's savings, which may include other types of accounts like an IRA or high-yield savings account.

Image source: Getty Images.

Meanwhile, the report noted the average contribution rate (the percentage of one's salary going to a 401(k) or similar plan) was 7.7%, with a median contribution rate of 6.8%. This is not a situation where workers are commonly maxing out their yearly contributions. In fact, just 14% of participants hit the limit last year ($23,000 for those under the age of 50, or $30,500 for those above 50).

A couple of tricks for increasing your contribution may help. A simple one is to increase your contribution rate whenever you get a raise. That way you don't feel the sting of putting more money away. Another more aggressive approach is to increase your contribution rate by 1% on a regular basis, say once a quarter. That's not a huge change, and you should be able to adjust gradually to the lower take-home pay.

And, of course, if you aren't contributing at all, then you should simply start doing so, even if it's just 1% of your salary. It's always a good idea to contribute enough to get your employer match (the vast majority of plans in the report offered one). That's effectively a guaranteed return on your investment.

A valuable yardstick, now do something with the data

At the end of the day, "How America Saves 2025" is just providing you with data. The report is not necessarily representative of all retirement accounts, just those administered by Vanguard.

The real question is what you do with the data. If you're doing well on the savings front, congratulations and keep at it. If you're currently falling short of where you want to be, don't be discouraged. The data here can provide you with a goal and the motivation to get there.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

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The Motley Fool has a disclosure policy.

• My dad is retired but stays busy, chaperoning events at the local high school and playing softball.
• It's not surprising to me — even before he retired, he never had just one job.
• His version of retirement has shaped my own relationship with work and hustle.

On a recent Saturday morning, my retired parents texted me, the resident family foodie, for restaurant recommendations in Raleigh, North Carolina. I don't live there, but they figured I'd know where to look. They're not on vacation, exactly — they're there for one of my dad's 60-and-over softball league tournaments.

This is just part of what retirement looks like for my dad, a retired FDNY firefighter. Rather than settling into a life of golf courses or cruise ship decks, he's just as busy now as he was when he was working — he's simply doing different things.

After more than 20 years fighting fires in New York City, with his pension secured, my dad could have easily slowed down. He could have embraced the kind of stillness most people dream about. Instead, he picks up shifts chaperoning events at our hometown high school a few times a month, everything from school dances to football games.

During his FDNY days, he spent years as captain of the department's softball team, and these days, he still hits the field for regular batting practice and travels around the country to compete in senior leagues. This is his idea of taking it easy.

It doesn't surprise me at all that he hasn't slowed down

Some people might ask: Why keep "doing" when you don't need to? But that question has never really made sense to me. My dad never had just one job. He was running into burning buildings, yes, but also running a small sunroom business he had built from the ground up while making sure he never missed my brother's hockey games or my dance recitals.

His own parents had grown up in Queens with very little and worked hard to move the family out to a house in the suburbs. I think, on some level, he felt he owed it to them to make good on that effort. The way I saw it growing up, slowing down almost felt selfish — movement wasn't just a habit, it was a way of honoring where we came from.

It's no surprise, then, that I find myself replicating that rhythm. I work full-time as the Head of Marketing at a music tech startup, which means that on evenings and weekends, I'm rarely truly "off." And, still, I pitch articles like this one, and I take on freelance clients when I can. The idea of being satisfied with just one job — even if it's a stable one — has never quite taken root in me, and that's not because I fear stillness, but because ambition has always looked like staying in motion.

Watching my dad retire taught me that effort doesn't stop being meaningful once the paycheck becomes optional; it just becomes far more personal when you're not just doing it for money. He does it because he likes being part of something that's larger than himself, whether that's in the hallways of his alma mater or trash-talking in the dugout with guys he's known for decades. There's an inherent purpose in that rhythm.

And sure, I know what the headlines say: older Americans are working longer, and it's often framed around worries about economic uncertainty, about disappearing pensions, and sometimes that is why. But, sometimes, it's a value system passed down — whether we asked for it or not.

I'll likely have a similar version of retirement

My dad's version of retirement is not about refusing to rest but rather about refusing to disappear. His life now is proof that being mentally, socially, and physically active can be its own kind of joy, that usefulness and community don't have to be casualties of aging.

He's still ordering new bats and gloves, booking travel to tournaments, and texting me for restaurant recs in whatever city he's landed in. Meanwhile, I'm working from home in San Juan, Puerto Rico, laptop open, pitching another story while practicing my Spanish and planning my next salsa class. Clearly, neither of us seems interested in sitting still.

When I think about my own future, I'm not sure I'll ever want the version of retirement where I just vanish into leisure, either. Maybe that's the gift my dad gave me: a model for what aging could look like — one where I don't lose sight of myself, but I refocus. Not a stop point, but an entirely new chapter to start — one where your time is still yours to shape in whichever way you see fit.

If I ever do retire, I hope it looks a lot like his. Full of play, purpose, and enough momentum to keep me in motion.

• When Orrin Onken retired in 2020, he thought his golden years would look quiet and relaxing.
• Instead, he realized his phone addiction was recreating the stress he experienced at work.
• Onken, a former lawyer, is now setting rules to prevent his phone from poisoning his retirement.

Recently, I decided to watch The Brutalist — a movie that's won multiple Academy Awards and has been widely praised by critics — with my wife. I got snacks from the kitchen, snuggled into my recliner, and prepared to be mesmerized by great art.

Not even 10 minutes had passed before I reached for my smartphone. No one was calling me. I wasn't expecting any texts, emails, or alerts. Yet, as the movie played, for reasons unknown even to me, I was staring at the tiny screen in my hand.

Relentless phone-checking has become a regular occurrence in my life, so much so that it's poisoning my retirement. It's become an addiction, and I'm determined to overcome it.

When I was a lawyer, my phone was mostly a helpful tool

I retired from the practice of law in 2020. During my working years, my screen time was quite limited. My staff screened calls to the office, and I checked emails twice a day on my computer. My mobile mostly stayed in my pocket, reserved for communicating with my office on court days or for calling my wife.

When the time came for me to stop working, my retirement plans were ordinary. I imagined the time-consuming demands of clients and courts would be replaced by travel, gardening, and the leisurely reading of good books.

But what I didn't predict was that my handy pocket computer would turn on me and become a source of the kind of stress I retired to escape.

As a retiree, I find myself checking my phone all too often

My smartphone is an amazing tool. It opens and starts my car. With it, I can locate my house keys, my luggage, and even my wife. I can change the temperature in my home and see what the security cameras see. I can read books, play five-minute chess, and follow the news.

But what do I really do? I check it dozens of times a day for little or no reason. I get hooked on clickbait in my news feed: "The ingredient that every grilled cheese sandwich needs," "Five exercises that will give you eternal life," and whatever else the algorithm has concocted to catch my attention.

When I was still working as a lawyer, I didn't get sucked into my news feed in the same way, mostly because I didn't have the time. Nowadays, I find myself checking my phone because it relieves the anxiety I feel when I leave it unchecked for too long.

In the course of my life, I've overcome difficulties with alcohol, nicotine, and overeating. With each of those addictions, I knew I was in trouble when I was no longer going for the substance to feel good, but because using gave me temporary respite from withdrawal symptoms. I was doing the same thing with my phone.

Over time, I realized the relaxed retirement I'd envisioned was being sandwiched into the intervals between checking my phone. During my working days, I obsessed about my cases, and my mind would wander off to one of them at random moments. Today, it wanders off similarly to the call of social media and my news feed.

Phones are too valuable a tool in our modern society for abstinence, so I knew I had to learn to regulate my screen use instead of going cold turkey.

The journey to wean myself from addiction has begun

I want a retirement in which I participate in the world, instead of being pulled out of it by repeatedly engaging in behaviors that don't make me happy.

My first step toward this goal was to admit my dependence and then become sensitive to the difference between using my phone productively and grabbing it at every uncomfortable juncture in life.

Two months ago, I set some rules I adapted from when I quit smoking twenty-five years ago. I'd notice when I felt an urge to check my phone, and then tell myself to wait 10 minutes. When that time had passed, I'd often forget about the urge or decide I could wait another 10 minutes.

My aim is to be intentional about checking my phone. And it's working. Those intermittent rewards are already losing their grip on me.

When I do eventually look at my phone, because I have a reason to, the cheap reward of three likes on my social media post still gives me a little thrill, but I no longer go looking for them by refreshing my feed twenty minutes after I posted.

I want to learn to control my phone, rather than let it control me

As I navigate healthier phone use, I won't condemn myself for watching funny videos of cats or stop playing online chess. I only want to end the mindless checking — the things that, when I am finished, make me feel stupid and sad.

I didn't walk away from the pressures of the law office to replace them with pressure from my phone. I aspire to a retirement of simple tasks and quiet days. It's a vision that no one ever achieves in this day and age, but for now, I won't allow that fantasy to be destroyed by my own behaviour and a tiny screen inside my pocket.

Do you have a story to share about retirement? Contact the editor, Charissa Cheong, at [email protected]

Key Points

• The 2026 annual cost-of-living adjustment (COLA) could come in light again based on recent data.

• As inflation has slowed, COLAs have come down in recent years.

• However, millions of retirees who are at least 65 should see significant savings from recent legislation.

• The $23,760 Social Security bonus most retirees completely overlook ›

Each year, millions of retirees wait anxiously for the Social Security Administration (SSA) to announce the new annual cost-of-living adjustment (COLA). The COLA determines how much Social Security benefits will increase the following year and helps retirees, many of whom rely on Social Security for all or a significant part of their income, budget for the following year.

While it's still months before the 2026 COLA is announced, recent data suggests retirees could be looking at the lowest COLA in years. However, millions of retirees will get a big financial boost anyway.

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Recent inflation data coming in soft

The COLA is always determined based on inflation data from the third quarter of each year. Unlike the broader market, which relies heavily each month on the Consumer Price Index for All Urban Consumers (CPI-U), the SSA relies on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). While the CPI measures the change in prices for 93% of the U.S. population, the CPI-W only covers about 29% of the population and measures expenses more common to the blue-collar workforce.

Image source: Getty Images.

To calculate the following year's COLA, the SSA looks at the year-over-year percentage change for the average CPI-W in July, August, and September. Here are the last four COLAs:

• 2022: 5.9%
• 2023: 8.7%
• 2024: 3.2%
• 2025: 2.5%

In recent months, data has pointed to slowing inflation. The monthly year-over-year change in the CPI-W has gone from 2.97% in January to 2.17% in May. There's still time before the data that actually counts toward the COLA comes into play, and factors like tariffs have the potential to make inflation change course.

But if the CPI-W stays on its current trajectory, retirees are looking at the worst COLA in five years. COLAs are a bit of a double-edged sword because retirees also benefit from a cheaper cost of living, but many argue that COLAs have not been able to keep pace with inflation since the turn of the century.

Even with a low COLA, millions will still get a big boost next year

Recently, another factor will come into play that's going to help people who are at least 65 years old: President Donald Trump's "big, beautiful bill," a large budget reconciliation package. The primary goal of the legislation is to pass trillions in tax cuts and allocate funds for border security, but such a large bill includes many other provisions.

The big one for retirees is a $6,000 additional senior tax deduction, or $12,000 for joint filers. To be clear, this is not aimed specifically at retirees collecting Social Security but anyone who is 65 or older, regardless of whether or not they receive Social Security benefits. To be eligible for the full deduction, single filers can make no more than $75,000, while joint filers can make no more than $150,000. The deduction completely phases out at $175,000 for single filers and $250,000 for joint filers.

According to an analysis conducted by the White House's Council of Economic Advisers, the bonus deduction stands to benefit millions of Americans who receive Social Security benefits and pay taxes on them.

Citing U.S. Treasury data, the Council found there were 58.5 million people age 65 and over receiving Social Security benefits in 2024. Of this group, 37.4 million received exemptions and deductions that exceeded their taxable Social Security income. With the new bonus deduction, this number will jump by over 14 million to 51.4 million, representing 88% of beneficiaries who are 65 or older and receiving Social Security.

The deduction is temporary. It will go into effect next year (for the 2025 tax bill) and last through the 2028 year's taxes. The tax savings for a married couple with $100,000 of income could be roughly $1,600 per year, according to The Wall Street Journal.

The average monthly benefit of a retired worker in May was $2,002, or about $24,024 a year. Assuming both people in a marriage receive that benefit (for a total of $48,048), the savings will amount to roughly 3.3% of the married couple's combined average benefits. That is equal to the average COLA since 1975 and above the average 2.6% COLA since the turn of the century. Remember, these savings are in addition to the 2026 COLA, whatever it ends up being.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• Future retirees should think in terms of maintaining their standard of living while working.

• Waiting even just a couple more years to retire can make a world of difference to your future retirement income.

• Simply establishing a target and making a plan to reach it is helpful, even if you’re never actually going to meet that goal.

• The $23,760 Social Security bonus most retirees completely overlook ›

Are you creeping up on the age of 65? Or maybe you're already there? If so, even if it's not happened yet, retirement is on your near-term radar.

This raises an important question for anyone around this age, but particularly for those near-65-year-olds who may still be working: How much should you have saved up for retirement by now?

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There's no absolute answer, since everyone's financial situation and needs are different. There is a rather specific rule of thumb, however, that just might help you figure out if you've got enough tucked away.

There is no universal number, but...

The proverbial magic number is $1.26 million, by the way. That's the amount of savings Northwestern Mutual's most recent annual survey of U.S. investors suggests people think they'll need to retire comfortably, down from 2024's figure of $1.46 million.

Just take the number with a grain of salt. It reflects a huge range of inputs. Plenty of people would be satisfied with half that amount. Others would still worry with twice as much.

Perhaps a more meaningful figure, therefore, is a number that would help you maintain the particular standard of living you enjoyed during your working years. A multiple of your current income does the trick, since this amount of savings will ultimately be used to generate retirement income.

That number is? About 10 times your annual salary as of the end of your working years, according to mutual fund company T. Rowe Price. For example, if you're earning $100,000 per year, you'll want to have on the order of $1 million saved up by the time you retire to ensure you're not downgrading your lifestyle.

The figure isn't etched in stone, to be clear. T. Rowe Price concedes that a multiple of anywhere between 7.5 and 13.5 times your late-career yearly earnings would be a reasonably healthy sum.

That range does align with similar suggestions from brokerage firms Charles Schwab and Merrill Lynch, however.

Be ready to make a tough decision

But you're miles away from even the low end of the suggested range? Don't sweat it too much -- most people are. Mutual fund giant and retirement plan administrator Vanguard reports that as of last year, the average account balance for 65-year-old (and up) participants in its retirement plans was just under $300,000, while the median amount was a little less than $100,000. Even adding non-work-related retirement savings to the mix doesn't seem like it would get most of those people to T. Rowe Price's suggested target.

Don't panic if you're part of this crowd. See, you've got options... particularly if you're still working.

Chief among these options is continuing to work for at least a little while longer. Doing so provides a double benefit to your retirement savings efforts. First, it lets you tuck away more income in a tax-deferring account funded by tax-deductible contributions. While this money won't have a great deal of time to grow, it will at least grow without being impeded by taxes. (Even cash-like money market mutual funds are paying on the order of 4% right now. Not bad.) If you're like most of your peers, most of life's major expenses like mortgages and school are in the rearview mirror, so you've got a fair amount of income you can put toward retirement.

Image source: Getty Images.

The second benefit of continuing to work? It allows you to postpone the initiation of Social Security's retirement benefits.

This is no small matter, either. Even just waiting another two years to reach your full retirement age of 67 would translate into monthly Social Security payments that are about 12% more than what you'd collect beginning at age 65. And if you can wait until you're 70 years old before claiming Social Security, your payments will be about 25% bigger than the ones you'd be getting if filing at 67 years of age.

Just setting a target is a great start

Again, it's just a rule of thumb. Most people survive just fine with far less, while others end up running out of money despite starting out retirement with a far bigger sum. How you handle your finances in retirement -- especially your first few years, when you're also still seeking investment growth -- can make the difference between having plenty and not having enough.

Nevertheless, this is a rule that a bunch of professional planners agree on. Whatever you can do to get yourself as close to this target amount as possible would be time and energy well spent.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

Charles Schwab is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends T. Rowe Price Group. The Motley Fool recommends Charles Schwab and recommends the following options: short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.

Key Points

• President Trump's bill won't eliminate federal taxes on Social Security benefits.

• However, a new deduction for seniors should reduce the federal taxes on benefits for many Americans.

• This deduction will be only temporary, though, and could cause Social Security to run out of money sooner.

• The $23,760 Social Security bonus most retirees completely overlook ›

The "One, Big, Beautiful Bill" that includes much of President Donald Trump's domestic agenda is now the law of the land. The Social Security Administration (SSA) began celebrating even before the president signed the bill.

On July 3, 2025, SSA posted to its website that the legislation "ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits." However, reality isn't quite that simple.

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Image source: Getty Images.

A new deduction for seniors

During his campaign for a second term as president, Trump promised to eliminate federal income taxes on Social Security benefits. His "One, Big, Beautiful Bill" doesn't accomplish that goal.

Instead, the bill features a new $6,000 deduction for Americans ages 65 and older. Some proponents of the legislation have referred to this deduction as a "senior bonus."

Before the "One, Big, Beautiful Bill" went into effect, around 64% of seniors ages 65 and older had exemptions and deductions that exceeded their taxable Social Security income. They therefore didn't pay any federal taxes on their Social Security benefits. The White House's Council of Economic Advisors estimates that this percentage will increase to 88% with the additional $6,000 deduction.

Not everyone will qualify for this new deduction. The full deduction will be available only to taxpayers ages 65 and older who have a modified adjusted gross income (MAGI) of up to $75,000 for individual filers and up to $150,000 for couples filing jointly. Each spouse who is at least 65 years old can take the deduction. A reduced deduction is available for higher earners with a MAGI of up to $175,000 for single filers and up to $250,000 for couples filing jointly.

One big, not-so-beautiful catch

SSA's celebration of the passage of President Trump's "One, Big, Beautiful Bill" was arguably overdone. Why? There's one big, not-so-beautiful catch with the new $6,000 deduction included in the legislation: Seniors will exchange short-term gain for long-term pain.

The benefits of the additional deduction for individuals ages 65 and older are indeed only short-term. The $6,000 "senior bonus" will be available only through 2028. While SSA's online post stated that many Americans will "no longer pay federal income taxes on their benefits," the truth is that the reprieve will be relatively short-lived.

The Social Security Commissioner said that the legislation "reaffirms President Trump's promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they've earned." However, his statement ignores the assessment by the nonpartisan Committee for a Responsible Federal Budget (CRFB).

The CRFB estimated that the president's "One, Big, Beautiful Bill" will reduce Social Security's revenue by around $30 billion per year. It projects that the insolvency date for the Social Security trust fund will now be 2032 instead of 2033.

If nothing is done to bolster Social Security before the trust fund runs out of money, benefits will be slashed by around 24%, according to CRFB's analysis. This is the long-term pain seniors will exchange for the short-term gain of not paying federal taxes on Social Security benefits for a few years.

Multiple big, ugly changes to Social Security are probably needed

What will it take to put Social Security on a firm footing so that benefit cuts won't be necessary? The solutions to the serious problem facing Social Security will involve slowing cost growth, increasing revenue, or both.

Slowing cost growth is a nice way of saying that benefits will need to be lower for some. One idea is to gradually increase the full retirement age in the future, a move that has been made in the past. This would reduce the lifetime benefits for younger Americans impacted by the change.

Increasing revenue means tax hikes. Some advocate for raising or eliminating the maximum taxable earnings that are subject to FICA taxes used to fund Social Security.

Reducing the federal taxes seniors pay on their Social Security benefits, even if for only a few years, may be popular. However, what Social Security beneficiaries probably need the most are multiple big, ugly changes that address the program's significant underlying problems instead of making them worse.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• Most states don’t tax Social Security benefits at all.

• Of those that do, the policies vary significantly.

• On the federal level, some seniors are about to get a new tax break.

• The $23,760 Social Security bonus most retirees completely overlook ›

One of the most common questions I get asked from older friends and relatives is, "Will I have to pay taxes on my Social Security benefits?"

The short answer is "maybe." Some retirees have to pay federal income tax on a portion of their Social Security benefits, depending on their income level. However, the exact amount of tax you'll end up paying on your Social Security benefits depends not just on your income level, but where you live.

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The good news is that most states don't tax Social Security benefits at all. In more than 80% of all U.S. states, Social Security income is completely exempt from any state income taxes.

In this article, we'll take a closer look at the states that don't tax Social Security, the few states that still do, and a new tax break seniors are about to get that will help offset any tax burden.

Image source: Getty Images.

The 41 states that don't tax Social Security benefits

First, let's get to the list you've been waiting for. If you live in one of these 41 states (or D.C.), you won't pay any state income tax on your Social Security benefits in 2025.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• Washington
• Wisconsin
• Washington, D.C.
• Wyoming

Note that this list has two types of states. There are those that don't have a state income tax at all, like Florida, and those that have provisions in their tax code that specifically exclude Social Security income (or all retirement income, in some cases).

The states that have Social Security income tax

There are only nine states that still tax Social Security benefits in 2025, and in alphabetical order, they are:

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia

There are a couple of key points to know, if your state is on this list.

First, the number of states that don't tax Social Security has increased in recent years and is likely to continue to do so. In fact, 2025 is the last year that West Virginia is going to tax Social Security.

Second, each of these states has its own tax framework for Social Security benefits, and they generally only apply to either higher-income households (significantly higher than the federal taxation thresholds) or to certain age groups, like Social Security beneficiaries under 65.

A special tax break for seniors

As a final thought, regardless of what state you live in, it's important to know that a special tax break is going into effect for tax years 2025 through 2028. President Trump campaigned on the elimination of taxes on Social Security altogether, but that isn't happening. However, the recent tax and spending plan included a senior bonus that should significantly lower any Social Security tax burden, especially on middle-income retirees.

The short version is that if you're 65 or older, you can qualify for a tax deduction of as much as $6,000 per person (so married couples can get twice that amount). It begins to phase out above income levels of $75,000 (single) and $150,000 (married), but if you qualify, you can use the deduction regardless of whether you choose to itemize on your tax return.

To be sure, this isn't likely to completely eliminate tax on Social Security benefits for many retirees, but it is certainly a valuable tax break worth knowing.

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If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• President Donald Trump signed his landmark legislation, the "Big, Beautiful Bill," into law on July 4.

• The bill includes a temporary new senior tax deduction intended for retirees that pay Social Security taxes.

• Not all Social Security recipients would be eligible for the deduction, but millions will be.

• The $23,760 Social Security bonus most retirees completely overlook ›

President Donald Trump signed his landmark "Big, Beautiful Bill" into law on July 4. The legislation is a large budget reconciliation that implements trillions in tax cuts and allocates more funds for border security, along with many other provisions.

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While the bill does not outright eliminate Social Security taxes, as Trump had previously promised, it will indirectly eliminate them for the large majority of Social Security retirees. In fact, over 14 million retirees are about to see lower Social Security taxes under the bill that will materially boost their purchasing power.

Increasing the senior tax deduction

Legislation can be confusing, and this is going to be one of those times. For several months, President Trump has discussed the idea of outright slashing taxes on Social Security benefits to give more money back to retirees. Many argue that Social Security benefits have lost purchasing power in the 21st century. However, cutting Social Security taxes outright would have significantly exacerbated financial strain that Social Security is already experiencing -- the Social Security trust funds are set to run dry by 2034.

What's more, Republicans are using the budget reconciliation to speed up the legislative process for the "Big, Beautiful Bill." Under this legislative process, lawmakers aren't allowed to pass provisions that would impact the Social Security trust funds. So, Trump and the Republicans essentially used a workaround by increasing senior tax deductions.

Image source: Getty Images.

To be clear, these deductions impact all seniors, regardless of whether they receive Social Security benefits. However, it's specifically aimed at those that currently pay Social Security taxes.

The House initially passed a $4,000 bonus senior deduction for single seniors and $8,000 for married seniors. But the Senate increased that to $6,000 and $12,000, respectively, which is what went into the final version of the bill. The bonus deduction is only temporary and will expire in 2028. .

According to the White House, which cites data from the U.S. Treasury Department, under the existing tax code, 37.2 million U.S. citizens over 65 claim Social Security benefits and qualify for enough exemptions and deductions that exceed their taxable Social Security income. That is equivalent to 64% of Social Security recipients age 65 and over. With the $6,000 bonus senior tax deduction, the White House expects this number to jump to 51.4 million beneficiaries, or 88% of Social Security recipients age 65 and over.

Retirees that claim Social Security between the ages of 62 to 64 will not benefit from this deduction, and many recipients with the lowest incomes already don't pay Social Security taxes. Single filers would only qualify for the maximum $6,000 if they make no more than $75,000 per year, while joint filers can make up to $150,000. The deductions would be phased out once single filers make $175,000 and joint filers make $250,000.

How much in savings will the deductions provide?

People should also keep in mind that deductions don't eliminate taxes. Rather, they lower the income that will get taxed, resulting in a lower overall tax bill. According to The Wall Street Journal, a married couple that makes $100,000 per year would realize roughly $1,600 in savings from the $6,000 deduction.

This is certainly significant, considering the average monthly Social Security check for retirees in May was about $1,950, or $23,400 annually. The $1,600 in savings is equivalent to nearly 7% of the average annual benefit this year, and is much higher than the typical Social Security annual cost-of-living-adjustment (COLA).

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• RMDs are mandatory withdrawals from retirement accounts that you must make.

• If the funds withdrawn are not needed, you have an array of reinvestment options.

• Diversification remains just as important as when you first invested the money.

• The $23,760 Social Security bonus most retirees completely overlook ›

If you saved for retirement using a traditional IRA, 401(k), 403(b), 457(b), or SEP IRAs, you're likely aware of RMDs: required minimum distributions. Depending on the year you were born, you're probably fulfilling your RMD requirements already, or will begin taking RMDs at age 73 or 75 (if you were born in 1960 or later).

RMDs are mandatory withdrawals from retirement accounts that must start by April 1 of the year following your 73rd or 75th birthday. Failure to take an RMD can lead to a hefty tax penalty. But what if you don't need that money immediately and want to put it somewhere it can continue growing?

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If you're reinvesting your RMDs, here's what you need to know.

Image Source: Getty Images.

The first step is to consider cash flow

When considering reinvesting, double-check your annual budget to ensure you're not cutting yourself short. Don't forget to factor in irregular expenses, like HOA fees, insurance premiums, home and vehicle maintenance, property taxes, and pet expenses.

You'll probably owe taxes

Uncle Sam wants his piece of the pie, no matter where or how you reinvest an RMD. Because you didn't pay taxes on the income when it was initially invested, it will be due in the tax year the RMD is made, even if you roll it directly over to another investment account.

Options are fairly limitless

Maybe you've had more time to study investment options or become more conservative now that you're not earning a regular income. In either case, your options are wide open. Your money can go wherever you believe will best serve your needs. For example, you can reinvest funds into mutual funds, stocks, bonds, or taxable brokerage accounts, where the money can grow and provide dividend income.

If you don't have one already, now may be a good time to meet with a retirement advisor who can help you understand each option's pros and cons. The important thing is to carefully consider your investment goals, risk tolerance, and how long you predict the funds will remain in the new account.

Diversification still matters

Even if you can't foresee a day when you'll need the money you're reinvesting, protecting your assets by diversifying the new investments is essential. Diversification is key to helping manage portfolio risks.

You may come to appreciate bear markets

A bear market is typically defined as a drop of 20% or more in a major stock market index from its recent high. Many factors, including an economic recession, geopolitical tensions, and rising interest rates, can trigger bear markets. While some investors dump stocks when things start to go south, hanging in there can be advantageous. A bear market gives you the opportunity to buy low and watch your assets grow in value as the market recovers.

One note about bear markets during retirement: Consider stowing enough cash in a separate account to cover living expenses so you aren't tempted to sell assets while portfolio values are at rock bottom. The goal is to take advantage of low prices to plump your portfolio while you can. The fact that you've decided to reinvest RMDs indicates that you don't believe you'll need the money to cover bills.

However, an unexpected issue, such as a higher-than-expected medical expense or natural disaster, could make it challenging to stick with the plan, and having an alternate source of funds could help.

Treat your new investments just as you treated your old

Anything you reinvest in needs a little babysitting. For a long-term investor, that means regularly reviewing your new strategy to ensure it continues to meet your needs. For example, if you decide to go for broke and make riskier investments, switching that strategy is OK if you find it's not working for you.

Consider yourself fortunate if you can reinvest an RMD rather than use it to pay bills. Once you've made the tough decisions, you can sit back and (hopefully) watch your money grow.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• Your Social Security benefit is based on your average monthly earnings over your 35 highest-earning years, adjusted for inflation.

• When you choose to claim affects the size of your benefit checks for the rest of your life.

• Married couples should choose their claiming ages together to maximize their household benefits.

• The $23,760 Social Security bonus most retirees completely overlook ›

It's natural to want to start Social Security as soon as possible. You've spent decades paying into the program, after all. You deserve to get some of that money back in retirement. But if your goal is to maximize your lifetime benefit, rushing in could be a costly mistake.

Squeezing the most money out of the program requires careful strategy and sometimes waiting. But if the three signs below apply to you, now could be the right time to apply for benefits.

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Image source: Getty Images.

1. You understand how your work history affects your benefits

The Social Security Administration bases your benefit on your average monthly earnings, adjusted for inflation, over your 35 highest-earning years. Understanding this gives you two key ways to boost your checks.

First, ensure you have worked work for at least 35 years before applying if possible. This helps you avoid zero-income years in your benefit calculation. If you can't work that long, that's OK. But be prepared for slightly smaller checks when retiring before hitting the 35-year mark. If you can work longer than 35 years, it's often worth doing because it could result in larger checks if you earn more now than you did in the past.

You can also increase your checks by boosting your income during your career. The only people this won't work for are those already earning more than $176,100 -- the taxable wage base in 2025. The government doesn't assess Social Security taxes on income over this amount, so earning more won't boost your checks.

2. You've chosen the best-claiming age based on your health and finances

Your claiming age also affects the size of your Social Security checks. The government assigns everyone a full retirement age (FRA) based on their birth year. Most people today have FRAs of 67, though some older adults have FRAs as young as 66.

Claiming before your FRA can reduce your checks by up to 30%. On the other hand, you can delay benefits past your FRA and your checks will continue to grow until you qualify for your maximum benefit at 70.

Generally speaking, most people would get a larger lifetime benefit if they waited until their FRA or beyond to claim. But this isn't the case for those in poor health. These individuals could be better off claiming early so they can get as much money from the program as possible before they pass away.

You may also have no choice but to claim early if you aren't able to work and don't have adequate personal savings to cover your expenses. In this case, claiming Social Security early is better than taking on costly debt. But you may still be able to delay benefits by a month or two in order to lock in slightly larger checks for the rest of your life.

3. You've talked your decision over with your spouse

Married couples often get more from the program when they coordinate their Social Security claiming strategy. When both have earned relatively similar amounts throughout their careers, that might mean each person delaying as long as possible.

Or if there's a significant income disparity, the lower earner might claim early to help the higher earner delay benefits. Then, once the higher earner applies, the lower earner can switch to a spousal benefit if it's worth more than what they're already getting.

Ensure you and your partner agree on a plan before you sign up for the program. It's possible to withdraw your Social Security application after you've applied, but it's difficult, so it's much better to choose your claiming age carefully from the start.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

• Debbie Boyd moved to Panama with her 97-year-old mother for lower costs and healthcare options.
• Boyd, a retired real estate broker, sought a more affordable lifestyle with different politics.
• Boyd said Panama has offered a vibrant culture and supportive community for her and her mother.

This as-told-to interview is with Debbie Boyd, 71, who moved to Panama from Atlanta with her 97-year-old mother, Doris Britto, who has dementia. Boyd and Britto moved in early 2025 and have enjoyed their time so far. Boyd has particularly appreciated the medical resources and lower cost of living abroad. This interview has been edited for length and clarity.

I moved to Panama in March this year, and my mother followed a few weeks later. I had always considered the possibility of relocating outside the US and had looked into moving for a couple of years before I retired. I read about the lower cost of living being less, but I think what spurred my action was the political climate.

My first impression is that I love it here. The people in Panama are very friendly and caring. Our goal now is to get more entrenched in this new life.

I've had a number of different careers

My mom and I are both native New Yorkers. She was a long-distance operator for the New York Telephone Company for over 40 years. I relocated to Atlanta in 1983, and my mom followed me there in 1986, when she retired. We were in the Atlanta area up until this year.

She traveled with her friends and helped me raise my son. She became active in some senior citizen groups in the area.

I had a couple of careers. I've been a real estate broker with my own residential real estate firm, worked as an administrative assistant, and taught classes in criminal justice for online universities as an adjunct professor. I retired in 2016.

I found that I was becoming bored and wanted to make better use of my time. After retiring, I took swim classes, got together with friends for lunch, and traveled.

After I initially retired, I took about one year to decompress and give some thought as to what I wanted for the next phase of my life. I spent mornings reflecting over a healthy breakfast and good coffee. I enrolled in Water Zumba classes and started a walking regime. I also used this time to reconnect with friends and making quite a bit of lunch dates with my former tennis team members.

I went back to work after a couple of years in a work-from-home position.

In 2018, I got a bladder cancer diagnosis, and it involved a serious surgery. I wasn't well enough to take care of my mother, though she and I lived together. She moved into a nursing home and lived there for seven years.

Once I determined earlier this year that I was going to move to Panama, I asked my mom if she wanted to come. She said she did.

I decided that it was probably best for both of us. Otherwise, she would be in Atlanta, and I would be abroad. My son and grandchildren are grown up and have very active lives, so I knew she would be pretty much alone in the nursing home, which I didn't want for her. Panama checked a lot of the boxes. Healthcare seemed excellent, and I had a friend who retired there who answered my questions.

At the time, we were doing fine financially. We're not wealthy people, but we've worked our whole careers, paid bills on time, handled finances responsibly, and have good credit. But things have gotten so tight in the US; it's really hard to make ends meet as a retiree living off of Social Security and a small pension.

As an African American, I feel we are being targeted and knowledge of our proud heritage is constantly under assault.

The first few weeks abroad involved managing many logistics

I did three scouting trips. I wanted to come first to find a place that was suitable for us logistically. My mother's in a wheelchair, so I looked for a place that was more level. We got as much paperwork done as we could ahead of time so she could leave her facility.

My son made time to help me out by bringing my mother a few weeks later. I set up an appointment with a doctor, and he was able to see her within a week of her getting here, making sure we could transfer her medications and prescriptions.

My mom told me that since I'm here and I've handled everything, she's happy and has enjoyed it so far. She came down with a cold a few weeks ago and lost her appetite, but she started eating again and felt better. She's happier to not be in a nursing home environment. We're now looking to find more activities we can participate in together.

My friend who retired here introduced me to another person who had a sister with MS and who connected me with a home care agency. A young lady comes in six days a week to tend to my mom; she helps bathe her, prepare her meals, change her sheets, and do her laundry.

I get much more home for the same price here

Rental prices are a little higher than what I expected they'd be, but there's a gamut of price ranges. I've seen everything from $500 a month up to beyond $3,000 where I'm located. I have a four-bedroom house, an in-ground pool in the backyard, a very large living room, dining room, and kitchen.

The rent is $1,500 a month, a bit more than what I was paying for my mortgage on my house in the States, the mortgage on which is $777 a month. I still own my home. However, there have been recent property tax and home owner insurance increases and I estimate my mortgage will be approximately $250 more in 2026. I get so much more for the same amount of money.

The utilities aren't too bad. One month, I had a $70 bill, but the next month was $300. Each bedroom has its own individual air conditioning unit, so we're trying to figure out when to run it and for how long.

I'm still doing some paperwork and making phone calls to get things settled. A couple of friends have come to visit, and my son has come three times. I have a lot more company coming over the next two months.

I handle my business here like I would at home; I go to the grocery store, the bank, and the pharmacy. I take Ubers because I don't want to drive here; they drive really fast. An Uber one-way is about $2.20.

I'm still getting acclimated

I've discovered, though, that Panamanians love to party and love music. There are also always dogs barking early in the morning and late at night, so I'm trying to get used to the noise.

We don't live in an expat neighborhood. I wanted to be immersed in Panamanian culture. It's been about two months since we've been here, but I haven't had much of a chance to meet our neighbors yet. All of the houses are gated individually, so it's not like you can just walk up to your neighbor's front door.

But when I go to the mall, people talk with me. When they realize I only speak a little Spanish, everybody's helpful, pleasant, and willing to help me find things.

I haven't gotten to eat out much, but I've gotten really into going to the market and getting fresh fruit and vegetables. The hospital near me has a program where they will accept Medicare Advantage if you have an emergency situation and are hospitalized, which I'm applying for. I'm also applying to a program that's $220 a year to have any tests, blood work, or lab work done. I have Chronic Obstructive Pulmonary Disease (COPD), and I was on oxygen when I was back home. I haven't had to use it since I've been here.

My goal now is to get more involved with expat groups. I joined one recently and went to a very nice luncheon, where I met new people. I hope to continue expanding my social network. I plan to make this my new home and get more involved in volunteering.

Key Points

• While every year you wait to claim Social Security after 62 will increase your checks, waiting may not be the right decision for millions of Americans.

• Having more than one source of income can make early retirement easier.

• A Boston College study found that after years of paying into Social Security, many are anxious to claim what is theirs.

If you're like most people, the earliest you can claim Social Security benefits is age 62. Waiting until later, though, will increase the size of your monthly checks . Still, there are plenty of reasons you may prefer to begin receiving Social Security benefits at 62.

Image source: Getty Images.

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Motivated by necessity

You've probably heard that you should postpone claiming Social Security for as long as possible to maximize the amount you receive. That one-size-fits-all advice does not work for everyone. Often, claiming benefits at 62 is a necessity.

Issues like job loss, health problems, or needing the money to cover the basics can all push you toward making an earlier-than-expected claim. It may not necessarily be what you wanted, but it was the most prudent thing to do given your circumstances.

Necessity is the most common reason Americans claim Social Security sooner rather than later. However, not everyone who makes a claim at 62 does so because they don't have options. Here are some less common reasons you might decide to take Social Security early.

You're expecting a long retirement

According to the Census Bureau, the average life expectancy for a man aged 62 is approximately 19.61 years. For a woman, it's 22.50 years. If you're in relatively good health and come from a family that tends to enjoy long lives, you may want to spend as many years as possible collecting the Social Security you've spent decades paying into, even if it means collecting less in total than you would have if you'd waited until age 67 or 70 to collect.

Let's face it: At 62, you may simply be ready to enjoy the rest of your life without the burden of a job.

You're expecting a shorter retirement

On the other hand, if you're dealing with serious health issues and it doesn't look like you'll live long, why not take the money you've worked for and enjoy the years you have left? As long as you have enough money to cover your expenses, early retirement may help you enjoy your remaining time.

Don't forget that you won't be eligible to apply for Medicare until three months before your 65th birthday, and healthcare is a significant consideration in any post-retirement budget. Make sure you have an alternate source of health insurance set up. If you're married and your spouse plans to continue working, that may be the easiest way to maintain coverage.

Your job is physically taxing

An Economic Policy Institute report found that roughly half of older workers (aged 50 to 70) have physically demanding jobs, with more than half working in environmentally hazardous conditions. Whether you're physically taxed by your day-to-day work, a challenging work schedule, or a high-pressure job, it makes sense to want to remove yourself from the situation.

Whether you have plenty of money put away to retire from a difficult job early or supplement Social Security benefits by taking on something easier on your body (and soul), taking care of yourself is crucial.

You consider Social Security supplemental income

The average Social Security check is around $2,000, or $24,000 annually. If you have other sources of income, like stock dividends, bonds, annuities, a pension, or a part-time job you can count on to make up the bulk of your income, you've not only planned well, but you've positioned yourself to retire a bit early.

You've earned it

According to the Center for Retirement Research at Boston College, workers feel a sense of ownership about Social Security benefits after years of payroll taxes being deducted from their paychecks. They are anxious to claim what is theirs. That desire may be amplified by concerns that Congress won't come up with a funding solution that prevents benefits from being cut.

There are clear pros and cons associated with claiming Social Security at age 62. However, the decision is strictly yours to make. Your best bet is to put pen to paper to determine your expected income sources and expected post-retirement expenses. Once you have those two figures, you'll have a good idea if retiring at 62 is a legitimate option.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• By automating, you can decide in advance how often you want to make withdrawals.

• Automation helps ensure withdrawal accuracy.

• If you're looking to simplify record-keeping, automation can help.

Whether you look forward to required minimum distributions (RMDs) because the money helps cover bills or resent them because you'd rather let the money grow, they're a way of life. If you're currently retired, you might already be taking RMDs. If you're getting close to retirement, you'll either be required to take them at age 73 (or 75 if you were born in 1960 or later).

No matter how you feel about those RMDs, there are at least 10 advantages to automating them so they hit your bank account without you having to lift a finger.

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Image source: Getty Images.

1. Convenience

Let's face it: Just because you're retired doesn't mean you're not busy. In fact, you may be busier as a retiree than you ever were when you were younger. Automating RMDs eliminates the need to mark the date on the calendar, manually calculate how much you need to withdraw, and ensure the job gets done.

Given how easy most financial institutions make it for you to automate your RMDs directly from your retirement account, you can set it and forget it.

2. You're in charge

With automated RMDs, you can customize when withdrawals are scheduled. For example, you may choose to receive distributions monthly, quarterly, or annually, depending on what you have going on in your life and cash-flow needs.

3. Timeliness

Automation allows you to stop worrying whether your RMDs will be taken on time, helping you avoid missed deadlines and dreaded penalties.

4. Accuracy

Automated systems reduce the risk of math errors in calculating the correct RMD amount, ensuring you comply with IRS regulations.

5. Tax efficiency

Once you've developed an overall tax planning strategy, an RMD can help ensure distributions are taken in a way that aligns with your plan (hopefully, helping you pay less in taxes).

6. Reinvestment

You can also pair automated RMDs with reinvestment strategies by setting up automatic transfers to other investment accounts, allowing you to potentially grow your funds while complying with RMD rules and regulations.

7. Simplified record-keeping

Automated RMDs simplify record-keeping, making it easier to track your distributions and report them accurately at tax time.

8. Help with multiple accounts

If you have multiple retirement accounts, automating your RMDs can simplify the way you track and manage RMDs across each account, ensuring you remain compliant with the specific rules of each account type and IRS rules.

9. Advisory services

Many financial advisors offer automated services as part of their overall retirement planning packages. These may include advice on managing distributions to minimize taxes and maximize remaining retirement savings.

10. Sidesteps emotional decision-making

Automating your RMDs can help you avoid making emotional decisions regarding withdrawals. Once automation is set up, you're less likely to make impulsive moves based on personal circumstances or fluctuations in the market.

If you're looking for more time to do the things you enjoy in retirement, automating your RMDs may be worth looking into. While it's not for everyone, leveraging the services of financial institutions and available technology can buy you the extra time you need.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Key Points

• Initial projections aren't calling for a very large Social Security cost-of-living adjustment (COLA) in 2026.

• Even if the official COLA comes in higher, seniors may not be happy with it.

• It's best to set yourself up to not be too reliant on Social Security raises each year.

It's hard to believe we're at the midpoint of the year. But alas, we're actually more than halfway through 2025, which means a lot of people are already starting to gear up for 2026. And for seniors on Social Security, now's the time when folks really start to think about what their upcoming cost-of-living adjustment, or COLA, will look like.

The purpose of Social Security COLAs is to help recipients maintain their buying power in the face of inflation. COLAs aren't something lawmakers have to vote in each year. Rather, they're automatic and tied to inflation.

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While it's too soon to know what 2026's Social Security COLA will look like, there are estimates available based on the inflation readings we have so far. And the Senior Citizens League, an advocacy group, is predicting that next year's Social Security COLA will amount to 2.5%, which is the same exact raise beneficiaries received at the start of 2025.

To be clear, though, that 2.5% projection could change -- possibly for the worse, but also for the better. But no matter what 2026's Social Security COLA ends up being, there's a good chance you'll be disappointed in it. Here's why.

Social Security COLAs have long failed seniors

Even though the purpose of Social Security COLAs is to help seniors avoid losing buying power, they've historically done a poor job in that regard. The Senior Citizens League says that between 2010 and 2024, Social Security recipients lost 20% of their buying power because their COLAs did not adequately keep pace with inflation as they were supposed to.

Much of the problem stems from how Social Security COLAs are calculated. They're measured based on price changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

However, the typical Social Security recipient is not an urban wage earner or clerical worker. Rather, it's a retiree who may or may not live in an urban area, and whose costs look very different.

Advocates have been trying to push lawmakers to move away from the CPI-W for COLA calculations and instead use a senior-specific index that tracks costs that are more common among retirees. But so far, nothing has changed. As a result, it's likely that no matter what 2026's Social Security COLA comes to, it probably won't give you the buying power you need it to.

Don't be overly reliant on Social Security COLAs

Because Social Security COLAs have a long history of failing seniors, it's best to have retirement income outside of those monthly benefits. If you're already receiving Social Security, it could be that you're retired and that it's a bit late to start building savings for your senior years. But getting a part-time job or joining the gig economy could help you boost your income for more financial flexibility.

If you're still working full-time, you're in an even better position, since you may have an opportunity to build up a sizable retirement nest egg. And even if you're not someone who's likely to retire with $2 or $3 million, even a small nest egg could provide a cushion and make your senior years far less financially stressful.

If you sock away $100 a month in a 401(k) or IRA over 30 years, and your investments grow at a rate of 8% annually, which is a bit below the stock market's average, you could end up with a nest egg worth about $136,000. And while that's not a huge amount of money, using the popular 4% rule, it could give you around $5,400 a year on top of Social Security. That could provide enough of an income boost to make up for COLAs that fall short.

We won't know what 2026's Social Security COLA looks like until October, so it's premature to get your mind set on any given number. But there's a good chance next year's COLA won't cut it for you, no matter what. The more steps you take to secure outside income, the less financial strain you're likely to undergo.

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