With the new year rapidly approaching, so is the opportunity for increased contribution limits. The SECURE 2.0 Act of 2022 has allowed the IRS to make cost-of-living adjustments to many retirement plans regarding maximum contributions and deductions as well as changes in applicable income brackets. The IRS has announced new limits for 2025 in addition to a new “Super Catch Up” for eligible individuals that attain age 60-63 in 2025. As your trusted financial advisors, we provide a comprehensive overview of the key changes that will shape your financial strategies in the coming year.
While some of these plans have increased limits, not all do, including contributions to IRAs. Highlights of the new or continuing limits are detailed below:
401(k), 403(b), 457 plans and Federal Thrift Savings Plan: $ 23,500
Catch Up for Individuals age 50+: remains $7,500
Super Catch Up for participants age 60-63: $11,250
IRA: remains $7,000
IRA Catch Up (age 50+): remains $1,000
SIMPLE IRA: $16,500*
Catch Up for Individuals age 50+: $3,500*
Super Catch Up for participants age 60-63: $5,250*
*The SIMPLE IRA has some exceptions to certain plans allowing higher limits than listed.
It is important to note that many of these plans also place limits that phase out maximum contributions or deductions for taxpayers within certain income ranges:
Traditional IRA Deductions Income Phase Outs:
$79,000-89,000 (single)
$126,000-$146,000 (MFJ – covered by workplace retirement plan)
$236,000-$246,000 (MFJ – not covered by workplace retirement plan)
Roth IRA Contribution Income Phase Outs:
$150,000-$165,000 (single, HOH)
$236,000-$246,000 (MFJ)
$0-$10,000 (MFS)
Social Security and Medicare:
Many other retirement program benefits are subject to cost-of living adjustments (COLA) including Social Security and Medicare. Regarding Social Security, the 2025 COLA stands at 2.5% adjusting for inflation rates with the goal to maintaining the purchasing power of retirees’ income. Recipients should expect the increase reflected in their January payments. In 2025, the standard monthly premium for Medicare Part B will be $185 accounting for an increase by $10.30. Premiums are calculated based on the taxpayers Modified Adjusted Gross Income (MAGI). For MAGI exceeding $106,000, higher premiums may be incurred based of the taxpayers IRS returns for the prior two years.
Tax Rates and Standard Deductions:
The Tax Cuts and Jobs Act is currently set to sunset 12/31/2025. Speculation currently surrounds whether the new presidential administration will make altercations to the expected sunset although no official legislation has been passed. In the meantime, the same marginal tax rates remain for 2025 with increases in the income ranges associated with each rate. With these increases, the standard deduction has also increased to:
$15,000 (single, MFS)
$22,500 (HOH)
$30,000 (MFJ)
These changes provide you with an opportunity to review your financial plan and adjust your contributions to the new limits. By increasing your contributions and maximizing deductions, you can set aside and invest more money for retirement that has the benefit of compounding interest. It is prudent to speak with your employer and financial advisor about increasing your contribution for the new year. 2025 introduces a host of opportunities for financial adjustments, demanding our attention as investors. As we navigate these changes, Alaska Wealth Advisors remains committed to providing astute guidance, ensuring your financial well-being is safeguarded through these evolving dynamics.
The opinions expressed are those of Alaska Wealth Advisors Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Note: This material should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.
