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Enhancing Retirement Strategy for ADT Employees: 2025 Social Security COLA Insights

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For ADT 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 ADT 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 ADT, 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 ADT Retirees

To manage potential tax increases, ADT 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

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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 ADT 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 ADT 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 ADT 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 ADT 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, ADT 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.

What is the ADT 401(k) Savings Plan?

The ADT 401(k) Savings Plan is a retirement savings plan that allows employees to save a portion of their paycheck for retirement on a tax-deferred basis.

Who is eligible to participate in ADT's 401(k) Savings Plan?

All full-time employees of ADT are eligible to participate in the 401(k) Savings Plan after completing a specified period of service.

How can I enroll in ADT's 401(k) Savings Plan?

You can enroll in ADT's 401(k) Savings Plan by accessing the enrollment portal through the ADT employee benefits website or contacting HR for assistance.

What types of contributions can I make to ADT's 401(k) Savings Plan?

Employees can make pre-tax contributions, Roth (after-tax) contributions, and, in some cases, catch-up contributions if they are age 50 or older.

Does ADT match contributions to the 401(k) Savings Plan?

Yes, ADT offers a matching contribution to the 401(k) Savings Plan, which is designed to help employees maximize their retirement savings.

What is the vesting schedule for ADT's 401(k) matching contributions?

The vesting schedule for ADT's matching contributions typically follows a graded vesting schedule, where employees become fully vested after a certain number of years of service.

Can I take a loan from my ADT 401(k) Savings Plan?

Yes, ADT allows employees to take loans from their 401(k) Savings Plan, subject to specific terms and conditions outlined in the plan document.

What happens to my ADT 401(k) Savings Plan if I leave the company?

If you leave ADT, you have several options for your 401(k) Savings Plan, including rolling it over to another retirement account, leaving it with ADT, or cashing it out (subject to taxes and penalties).

How often can I change my contribution rate to ADT's 401(k) Savings Plan?

Employees can change their contribution rate to ADT's 401(k) Savings Plan at any time, subject to the plan's guidelines.

Are there investment options available in ADT's 401(k) Savings Plan?

Yes, ADT's 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.

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For more information you can reach the plan administrator for ADT at 1501 Yamato Road, Boca Raton, FL 33431; or by calling them at (800) 280-6946.

*Please see disclaimer for more information

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