Enhancing Retirement Strategy for Ernst & Young Employees: 2025 Social Security COLA Insights

Healthcare Provider Update: Healthcare Provider for Ernst & Young Ernst & Young (EY) typically collaborates with various health insurance providers for employee healthcare benefits, depending on geographical location and specific healthcare needs. Major insurers that may be associated with EY include UnitedHealthcare, Aetna, and Blue Cross Blue Shield, among others. The specific provider may vary based on individual employee requirements and the location of the business unit. Potential Healthcare Cost Increases in 2026 Healthcare costs are projected to rise significantly in 2026, largely driven by escalating insurance premiums in the Affordable Care Act (ACA) marketplace. Recent analyses indicate that some states may see premium hikes exceeding 60%, as major insurers cite rising medical costs and the potential lapse of enhanced federal subsidies as key contributors. Without these subsidies, over 22 million enrollees could face out-of-pocket premium increases of upwards of 75%, creating a challenging financial landscape for many consumers as they navigate their healthcare expenses. Click here to learn more

For Ernst & Young employees nearing retirement, navigating the economic landscape is essential for maintaining financial health. The annual Social Security Cost-of-Living Adjustment (COLA), a significant factor in this dynamic, is set to increase by 2.5% for the coming year, reflecting more moderate inflation trends compared to recent years.

Understanding the 2025 COLA for Ernst & Young Employees

Originally established in the 1970s to address hyperinflation,  the COLA is designed to adjust Social Security  benefits in line with cost-of-living increases, offering retirees a measure of stability. This adjustment is linked to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which saw a 2.2% rise through September 2024, forming the basis for next year’s COLA determination.

While an increase in Social Security benefits is beneficial, it’s important for retirees, including those from Ernst & Young, to understand potential tax implications. Higher Social Security benefits can lead to increased combined income, which may affect taxes due to the inclusion of wages, interest, dividends, and distributions from retirement accounts like 401(k)s and IRAs.

For example, a retiree receiving $24,000 in Social Security benefits while drawing $37,667 from an IRA might face higher tax obligations if inflation requires increased withdrawals. This could raise the taxable portion of their Social Security benefits, thus elevating their overall tax liability.

Tax Management Strategies for Ernst & Young Retirees

To manage potential tax increases, Ernst & Young retirees may consider several strategies:

1. Diversifying Income Sources : Using brokerage accounts can help control how Social Security benefits are taxed, as capital gains may contribute to provisional income, but the principal does not.

2. Strategic Withdrawals : Managing withdrawals from traditional 401(k)s or IRAs is essential, as these are taxed as ordinary income. Complying with required minimum distributions is also crucial to prevent penalties.

3. Utilizing Tax-Advantaged Accounts : Withdrawals from Roth IRAs or Roth 401(k)s, and contributions to Health Savings Accounts (HSAs), are exempt from federal taxes and do not impact Social Security taxes.  https://www.irs.gov/  

Timing Social Security Benefits Wisely

Featured Video

Articles you may find interesting:

Selecting the right time to begin collecting Social Security benefits is a critical decision. Starting benefits early may seem appealing, especially with an increased COLA, but it usually results in lower lifetime earnings. A more measured approach for Ernst & Young employees could involve waiting until the Full Retirement Age (FRA) of 67 or even delaying until age 70, allowing benefits to increase by 8% annually after FRA.

Long-Term Planning for Ernst & Young Retirees

Long-term tax planning is valuable for navigating retirement successfully. This approach includes multi-year strategies that can potentially reduce overall tax burdens. For comprehensive planning, it’s beneficial for Ernst & Young retirees to consult with a tax advisor who can handle the intricacies of tax management effectively and align strategies with their financial and retirement goals.

Final Thoughts

Understanding the implications of the Social Security COLA is essential for Ernst & Young retirees facing the challenges of inflation and tax planning. By adopting a careful financial strategy and seeking professional advice, retirees can enhance their financial foundation. Proactive financial management is key to building a stable and fulfilling retirement.

Additionally, Ernst & Young retirees should note the  Senior Citizens' Freedom to Work Act of 2000 , which removes the earnings test for Social Security recipients who have reached or exceeded their full retirement age. This change allows retirees who continue working while receiving benefits to do so without a reduction in benefits, regardless of their earnings. This policy can significantly increase income flexibility for retirees who choose to remain active in the workforce.