As 2024 comes to an end, now is the time to plan for the year ahead. Understanding the upcoming changes to the IRS contribution limits in 2025 can help you make informed decisions. Additionally, strategies like delaying retirement may allow you to maximize Social Security benefits and extend investment growth.
Retirement Account Contribution Limits for 2024
The IRS has set the following contribution limits for retirement accounts in 2024:
- 401(k), 403(b), and most 457 Plans
- Contribution limit: $23,000.
- Catch-up contributions (for those aged 50 and older): $7,500, for a total of $30,500.
- Traditional and Roth IRAs
- Contribution limit: $7,000.
- Catch-up contributions (for those aged 50 and older): $1,000, for a total of $8,000.
- Simple IRA
- Contribution limit: $16,000.
- Catch-up contributions (for those aged 50 and older): $3,500, for a total of $19,500.
Taking full advantage of these limits before year-end may reduce your taxable income and boost your retirement savings.
Looking Ahead to 2025
It’s essential to plan for maximizing your retirement contributions in the upcoming year. The IRS has announced the following changes to contribution limits for 2025:
- 401(k), 403(b), and most 457 Plans
- Contribution limit: $23,500, up $500 from 2024.
- Catch-up contributions (for those aged 50 and older): Remains at $7,500, totaling $31,000.
- Special catch-up contributions for ages 60-63: $11,250, as per the SECURE 2.0 Act, totaling $34,750.
- Traditional and Roth IRAs
- Contribution limit: Remains at $7,000.
- Catch-up contributions (for those aged 50 and older): Remains at $1,000, totaling $8,000.
To optimize your retirement savings:
- Maximize 2024 Contributions
- Ensure you’ve contributed up to the 2024 limits to reduce taxable income and enhance your retirement fund.
- Plan for 2025
- Adjust your savings strategy to meet the new limits, taking advantage of increased contribution opportunities.
- Utilize Catch-Up Contributions
- If you’re 50 or older, make full use of catch-up contributions to boost your retirement savings.
- Give Us a Call
- Seek professional advice to integrate these contributions into a comprehensive financial plan tailored to your goals.
Staying informed about these changes and adjusting your savings plan accordingly can significantly impact your financial security in retirement.
How We Can Help
Working with us is essential for navigating year-end contributions and planning for 2025. We can assist you in:
- Optimizing Contributions
- We’ll ensure you’re maximizing your 401(k), IRA, and other contributions and help you prepare for any limit adjustments in 2025.
- Tax Strategy Alignment
- We can develop strategies to reduce your taxable income and to take advantage of deductions. For example, in Wealth on Purpose, Ballentine explains that having a mix of non-IRA, Roth IRA, and Traditional IRA funds can help you remain in a lower tax bracket, while reducing the impact of taxes on your Social Security benefits.
- Portfolio Adjustments
- We’ll review your investments to better align with your retirement timeline and risk tolerance.
- Social Security Planning
- We can help you calculate the financial impact of delaying Social Security and determine the best time to begin receiving benefits.
- Healthcare Strategy
- For those nearing retirement, we’ll help evaluate employer-sponsored benefits and Medicare options to ensure a seamless transition.
Personal Considerations
While the financial benefits of maximizing contributions and delaying retirement are significant, always consider your specific circumstances. Unexpected health issues, job market challenges, or personal priorities like travel or spending time with loved ones may influence your decisions.
Final Thoughts
Maximizing your retirement contributions before the end of the year and preparing for changes in 2025 are key steps in building a secure financial future. Taking advantage of contribution limits, catch-up opportunities, and the benefits of delayed retirement can make a significant impact on your long-term savings.
Consulting with us can ensure you’re on track and fully leveraging these opportunities. Contact us today to discuss how we can help you prepare for a successful 2025 and beyond.
Sources located at the bottom of the article
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Our mailing address is:
Ballentine Capital Advisors
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Greenville, SC 29607
Sources:
- IRS Retirement Plan Contribution Limits for 2024
- IRS Retirement Plan Contribution Limits for 2025
- Fidelity: Retirement Contribution Tips
- Secure 2.0 Act Changes Affect How Businesses Complete Forms W-2
- Ballentine, B. (2023). Wealth on Purpose: Your Path to Grow, Protect, and Keep Wealth
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