7 Saving and Retirement Rule Changes for 2025
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welcome back i really appreciate you joining me for money girl episode eight hundred seventy eight i'm laura adams an award winning author finance spokesperson money speaker founder of the money stack a sub stack newsletter and host of money girl with over forty three million downloads we're going to come today about some of the changes that are coming up in twenty twenty five and the internal revenue service or i r s changes perks and contribution limits for various tax advantaged accounts based on annual inflation changes while the inflation rate has come down it's still high enough to result in small adjustments then you'll be able to take advance APP starting next year so this podcast will review seven changes to various tax advances accounts starting in twenty twenty five so if you want to pay less tax and save more for a secure future stay with me to learn more so let's get in to those seven savings and retirement rule changes that will begin in twenty twenty five so now is an excellent time to adjust your savings plan to take advantage of them in the new year number one is health savings account or h s a contribution limit increase if you purchase an h s a qualified health plan IT could be through an employer or on your own you can use one of the most tax efficient accounts on the planet it's an h sa your contributions are tax deductable and your investment earnings are never taxed if you spend them on qualified health care expenses and as i mentioned the limits are going up in two thousand twenty five if you are single with an individual hs a qualified health plans so it's just for yourself your h sa contribution limit increases from four thousand one hundred fifty and twenty twenty four to forty three hundred and twenty twenty five if you have a family held plan so you've got a spouse or a dependent somebody addition to yourself on the plan your limit increases from eighty three hundred and twenty twenty four to eight thousand five hundred fifty to 二二 five plus if you're over fifty five you can contribute an additional one thousand dollars to either type of plan and that remains unchanged so that's the case this year in two thousand twenty four and it's gna remain one thousand and twenty twenty five all IT the second change is that flexible spending account or f s a contribution limits increase and f s a is another type of medical spending account that allows pretax contributions however unlike an h sa it's only offered by yers so if you have a job where you have the option to contribute to an fsa you can differ a portion of your paycheck to the count and then use that money to pay qualified health care and childcare expenses unlike an h r a which has a no spending deadline f s a funds typically must be spent by the end of the plan year is known as a use IT or lose IT provision for twenty twenty four f s a contribution limits are thirty two hundred and they increase to thirty three hundred in twenty twenty five the third change is that workplace retirement account contribution limits are increasing most workplace retirement plans so we're talking about four o one case four o three bees four fifty seven and tsp allow employees to contribute up to twenty three thousand dollars in twenty twenty four based on cost of living adjustments the limit will increase by five hundred dollars to twenty three thousand five hundred and twenty twenty five now the catch up contribution limit for those participants over fifty is seventy five hundred and that's going to remain the same next year so that would give you a total limit of thirty one thousand dollars for next year for twenty twenty five those limits apply to pretax traditional retirement plans and after tax rough accounts however there is an exception for older plan participants that i'll cover next if your company also contributes matching or profit sharing funds u and your employers total contributions increase from up to sixty nine thousand and twenty twenty four to seventy thousand and twenty twenty five and if you're over fifty your total contribution limit including catch ups will be seventy seven thousand five hundred starting next year so that's seventy thousand plus seventy five hundred for the total of seventy seven thousand five hundred for next year if you're over fifty note that four fifty seven plants have unique catch up rules so you want to confirm the total with your plan administrator for next year also if you have a simple retirement plan the contribution limits aren't different there are sixteen thousand for twenty twenty four but will be increasing to sixteen thousand five hundred into twenty twenty five r the fourth change is that workplace retirement plans have new catch of limits while there isn't a blanket increase in catch up contribution limits for every workplace retirement plan participant over fifty a subset of them will be able to contribute more starting in twenty twenty five so under the secure two point o act those age sixty to sixty three can contribute the greater of ten thousand dollars or one hundred fifty percent of the regular catch up amount and i mentioned that that is seventy five hundred for four one case in four three bees in twenty twenty four and twenty twenty five so therefore what we're calling the super catch up amount will be eleven thousand two hundred fifty dollars for participants in that age range starting next year you can use that super catch up rule starting january one in any year that your age sixty sixty one sixty two and sixty thirty so you ve got four years to take advantage of the super catch up amount if you participate in a simple plan regular catchup p contribution limit for employees over fifty remains the same for twenty twenty five at thirty five hundred but those age sixty to sixty three can contribute five thousand two hundred fifty for twenty twenty five.

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The fifth change is that rough I R A income limits increase. If you've been listening to money girl for any length of time, you'd likely know that anyone with earned income, no matter your age, qualifies for a traditional or rough I R A. However, there are rough I R A income limits, and i'm going to review what's changing about them in just a moment.

But I array contribution limits will not increase into twenty twenty five. Unfortunately, they're going to remain the same seven thousand dollars. That's what IT is this year. That's what IT will be next year.

If you're over fifty, you qualify for an an additional one thousand dollar catch up, giving you a total contribution of eight thousand and twenty twenty four or twenty twenty five. However, the rough I R A income cut off will increase next year as follows, allowing more people to qualify for this terrific account. Single taxpayers with modified adJusting growth income are what we call magii above.

One hundred sixty one thousand in twenty twenty four cannot participate in a rough I for twenty twenty five. The threshold gets raised to imagine over one hundred sixty five thousand dollars. Mary taxpayers filing taxes jointly with magi above two hundred forty thousand cannot contribute to a routh array in to twenty twenty four that increases to two hundred forty six thousand and twenty twenty five.

So if you're close to the cut off on that income threshold, be sure you understand you know what the new limits will be so you can take advantage of a rah I ra ah, if that something you're interested in. Number six, step I R A contribution limits increase a step ira or simplified employee pension ira is a retirement plan for business owners, their employees and the unemployed. This is the retirement plan that I have.

Contributions can only come from an employer. Employee s can never contribute their own funds to a step ira. For twenty twenty four, contributions are limited to the lesser of twenty five percent of compensation or sixty nine thousand dollars, but the limit increases to the lesser of twenty five percent of compensation or seventy thousand dollars per year twenty twenty five.

And note that step errors do not offer additional catch up contributions. And number seven, our last change that will cover is solo for a one k contribution limits increase. A solo for one key is a retirement plane for the self employee. Without any full time employees except a spouse, you can make contributions as both the employer and the employee in your business. For twenty twenty five, you can make solo for one kay contributions as an employee up to twenty three thousand five hundred.

You're also allowed to contribute up to twenty five percent of compensation for the employer portion, but the aggregate contribution limit will be up to seventy thousand dollars if you're under fifty and seventy seven thousand five hundred dollars if you're over fifty. However, those between sixty and sixty three can have aggregate contributions up to eighty one thousand two hundred fifty dollars. So that's seventy thousand plus eleven thousand to fifty.

So that's the super cash up amount. You can contribute up to one hundred percent of your compensation if you don't exceed those limits. Now these aren't the only irs changes for twenty twenty five, but I wanted to highlight several here that are likely to affect most americans tax advantage, savings and retirement accounts. I hope this has been helpful, and I hope you will get you thinking about maybe contributing a little bit more if you're able to in twenty twenty five. I really appreciate you being with me.

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