As President Donald Trump kicks off a second term, many older investors are focused on how shifting policy could affect their wallets.
But some key changes for near-retirees were already enacted for 2025. These updates could have a big impact on your finances — and may easily be missed, financial experts say.
Nearly half of Americans ages 55 to 64 don’t feel prepared to retire by their target date, according to a survey from the American Savings Education Council, which polled more than 2,000 U.S. adults in early 2024.
More from Personal Finance:
Vanguard’s $106 million target-date fund settlement offers tax lesson
There’s a ‘big change’ for inherited IRAs in 2025, advisor says
Investors may be able to file taxes for free this season. Here’s who qualifies
But planning around these 2025 changes could boost retirement security, experts say. Here’s what older workers need to know.
For 2025, investors can save more with higher 401(k) plan limits. Employees can defer $23,500 into 401(k) plans, up from $23,000 in 2024. The catch-up contribution limit is $7,500 for workers ages 50 and older.
But thanks to Secure 2.0, there’s a “super catch-up” for investors ages 60 to 63, said certified financial planner Michael Espinosa, president of TrueNorth Retirement Services in Salt Lake City.
The catch-up contribution for employees ages 60 to 63 jumps to $11,250 for 2025. That brings the total deferral limit to $34,750 for these workers.
“This could be huge” for deferring taxes in 2025, Espinosa said.
Some 15% of eligible participants made catch-up contributions in 2023, according to Vanguard’s 2024 How America Saves report, based on data from 1,500 qualified plans and nearly 5 million participants.
An inherited individual retirement account could boost your nest egg. However, some heirs may face an IRS penalty for missed required withdrawals in 2025, experts say.
With more focus on shifting economic policy, “it’s easy to see how this one could get buried,” said CFP Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.
Since 2020, certain inherited accounts must follow the “10-year rule,” meaning heirs must empty inherited IRAs by the 10th year after the original owner’s death. This applies to heirs who are not a spouse, minor child, disabled, or chronically ill, and certain trusts.
Starting in 2025, the IRS will enforce the penalty on heirs for missed required minimum distributions, or RMDs. The penalty is 25% of the amount that should have been withdrawn. But it’s possible to reduce that penalty if your RMD is “timely corrected” within two years, according to the IRS.
Heirs must take yearly withdrawals if the original IRA owner had reached their RMD age before death.
If you or your spouse work in public service and expect to receive a pension, new legislation could mean higher Social Security benefits in retirement.
Enacted by former President Joe Biden in January, the Social Security Fairness Act ended two provisions — the Windfall Elimination Provision and Government Pension Offset — that lowered benefits for certain government employees and their spouses.
“This change is significant for many retirees who had their benefits eliminated or reduced,” said CFP Scott Bishop, partner and managing director of Presidio Wealth Partners, based in Houston.
The Social Security Administration is working on the timeline for the new legislation and will update its website when more details are available.
https://www.cnbc.com/2025/01/25/retirement-changes-for-2025.html
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Investment advisory services offered through Donato Wealth Management, PLLC, dba Empower Wealth Management and Empower Wealth & Tax (“Empower Wealth Management” or “EWM”),
an SEC registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
The information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional adviser before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned, or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Personal investment advice can only be rendered after the engagement of EWM, execution of required documentation, and receipt of required disclosures. All investment and insurance strategies have the potential for profit or loss. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. Past performance is no guarantee of future results. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD #305031.
Insurance products and tax services are offered through Senior Tax and Insurance Advisors, PLLC, dba Empower Wealth Group (“Empower Wealth Group” or “EWG”). Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not in any way refer to investment advisory products offered through EWM. Rates and guarantees provided by insurance products and annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. EWG is not affiliated with or endorsed by the U.S. Government, Social Security Administration, nor the federal Medicare program. You may be contacted by a licensed insurance agent. Calling the number above will direct you to a licensed insurance agent. EWG may not offer every plan available in your area. Any information provided is limited to plans available in your area. Please contact Medicare.gov or 1-800-MEDICARE.
EWM and EWG are both affiliated companies of Empower Wealth, LLC (“Empower”). Investment adviser representatives of EWM may have a financial incentive to recommend tax and insurance products and/or services offered through EWG which presents a conflict of interest. This conflict is addressed by EWM’s adoption of its Code of Ethics, which requires that all EWM’s Associated Persons place the interest of clients ahead of their own. Clients of EWM are also free to choose their own tax and/or insurance professionals and are under no obligation to utilize the services offered through any related entities or persons associated with Empower.
Strategic Partners listed on this page are not employees of EWM and are not affiliated through common ownership.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.
© Empower Wealth Management All Rights Reserved.