It’s that time again to start fresh by reflecting on the past 12 months, reviewing and modifying goals, and setting expectations for the year ahead. Here are some important 2025 updates to help with your financial planning:
Saving for retirement. This year, the IRS increased retirement savings limits for 401k plans to $23,500, the maximum an individual can defer to their company retirement plan. The 401k catch-up contribution for those 50+ remained the same at $7,500. The limits apply to traditional 401k contributions as well as ROTH 401k contributions. You may elect to contribute to both pre-tax and post-tax money types in your 401k, but remember, the combined contribution amount cannot exceed the annual limit. In addition, SECURE ACT 2.0 (a federal law enacted to encourage saving for retirement) added a new higher catch-up contribution limit of $11,250 for those aged 60 to 63. Given these additions, if you want to make or change contributions, always check your current employer’s plan provisions before doing so.
Individual Retirement Accounts (IRAs) also remain the same as last year at $7,000 and the catch up at $1,000. SIMPLE IRAs increased by $500 to $16,500. The SIMPLE IRAs catch up remains $3,500.
Social Security wage base limit. In 2025, the social security tax of 6.2 percent will suspend once your compensation rises above $176,100. Please note Medicare does not have a wage base limit.
Health savings accounts (HSAs). HSA limits for 2025 are $4,300 for individual coverage and $8,550 for families. Those over 55 years old may contribute an extra $1,000 to their HSA. To be eligible for an HSA, you must be enrolled in a high deductible HSA-eligible health plan; not be enrolled in Medicare; not be claimed as a dependent on another’s tax return; and not have a full-purpose health care flexible spending account (FSA). While HSA accounts provide triple tax benefits, tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses, it’s important to keep in mind the penalties that may occur if used improperly.
Flexible spending account (FSA). A health care FSA is another way to save costs on health care through your employer. The 2025 limit is $3,300. Contributions are deducted per paycheck on a pre-tax basis. Eligible health expenses may be paid through your account, or you may submit eligible receipts and get reimbursed. This type of account is a use-it or lose-it account, and because of this you must be careful when electing the annual amount. Some employer plans may allow for extension into the following year or a carryover for a short period of time. It’s important to check the benefits specifications before setting up an FSA.
These are just a few of the updates for this year. When planning for your financial future, always speak to an expert to ensure you understand what’s to come — so you can make the best decisions for your needs.
Michele Sarna is a certified financial planner™ with Beacon Pointe Advisors and can be reached at (760) 932.0930 or [email protected].
Provided as information only and should not be considered investment, tax or legal advice or a recommendation to buy or sell any type of investments. Asset Allocation, portfolio diversification and risk strategies cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Form ADV contains important information about Beacon Pointe Advisors, LLC, and may be viewed at: adviserinfo.sec.gov.
Comments (0)