Retirement Planning Changes for 2025

Several key changes are now in effect for 2025, impacting retirement contributions, tax thresholds, and Medicare costs. With higher 401(k) limits, increased estate and gift tax exemptions, and new Medicare Part D cost caps, these updates could affect your financial planning.

Here’s what you need to know to make the most of these changes.

Higher Contribution Limits for Savers

• Starting in 2025, the 401(k) employee deferral limit will jump to $23,500, up from $23,000 in 2024.
• While catch-up contributions for workers age 50 and older will remain at $7,500, investors aged 60 to 63 can save an extra $11,250 in 2025 thanks to Secure Act 2.0. These workers aged 60-63 can defer a total of $34,750, which is about 14% higher than in 2024.

Higher Estate & Gift Tax Thresholds

• The amount of an estate that’s exempt from estate tax will increase to $13.99 million per person in 2025. This means that married couples can effectively shield nearly $28 million from the federal estate tax. 
• Meanwhile, the gift tax exclusion is increasing to $19,000 ($38,000 for couples) in 2025. This means individuals can gift up to $19,000 to each recipient next year without having that amount count toward their gift-tax exclusion.

Social Security Fairness Act: Key Changes & What it Means for Your Retirement

The Social Security Fairness Act introduces important updates, especially for public sector workers with non-Social Security-covered pensions. Our Wealth Advisor, Jaron Beach, breaks down key changes. Read more >

IRS Releases Tax Inflation Adjustments for Tax Year 2025

Standard Deductions:  For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. If you are over 65 or blind, add $1,600 for married filing jointly and $2,000 for unmarried and not a surviving spouse.

Marginal Rates: For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). 

Prescription Drug Costs

• People who are covered by a Medicare Part D plan will now have their out-of-pocket drug costs capped at $2,000 per year starting next year.
• Seniors who are enrolled in Part D can opt into a new payment program that enables them to spread their prescription-related costs throughout the year.

Long-Term-Care Premium Deductibility Increases

People who are age 40 or under can deduct $480 in long-term-care premiums in 2024; those aged 41 to 50 can deduct $900; people aged 51 to 60 can deduct $1,800; those aged 61 to 70 can deduct $4,810; and those 71 and older can deduct $6,020.

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