We’re at the time of the year where the IRS and Social Security administration release increases (if any) to key financial figures. Similar the past two years, there are increases across the board going into 2025. These are detailed below and can help you in your planning for next year.

Retirement Plan Contribution Limits 

Once again, the contribution limit to 401(k) and 403(b) plans is increasing. In 2025, you can contribute $23,500 if you are under age 50 and $31,000 for those age 50 and older with the $7,500 catch-up provision. Starting in 2025, workers aged 60 to 63 can boost annual 401(k) catch-up contributions by $11,250 (150% of the catch-up limit) for total contributions of $34,750. If you are already set-up with your employer to “maximize” contributions, the increase should be automatic with your first paycheck in 2025. If you save a set dollar amount or percentage, this number may need to be recalculated for 2025 based on the new limits. Additionally, the total (employee and employer before catch-up) contribution limit will increase to $70,000 for 2025. This means you may see an increase in employer funds going into your retirement accounts.

IRA Contribution Limits

Contributions to IRAs will stay the same at $7,000 for 2025 plus a catch-up of $1,000 for those 50 and older. While the contribution amount did not increase, income limits for deductibility on traditional IRAs and eligibility for Roth IRAs did increase for 2025. 

Health Savings Account (HSA) Contribution Limits 

HSA contribution limits will increase to $4,300 in 2025 for single coverage and to $8,550 for family coverage. The $1,000 catch-up contribution for those age 55+ remains the same.

Social Security Payments

Social Security benefits will also increase by 2.5% for 2025. Over the last decade the cost-of-living adjustment (COLA) increase has averaged about 2.6%. The COLA was 3.2% in 2024.

Social Security Wage Base

For those still working and paying social security taxes, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $176,100 (from $168,600). 

Medicare Premiums

There are increases across the board for Medicare premiums in 2025. The standard premium is increasing by $10.30 per month to $185, which is similar to the 2024 premium increase. There is mixed news in the surcharge for higher incomes (Income-related Monthly Adjustment Amount or IRMMA). First, the income tiers are increasing (for the first tier, the increase is $3,000 for single filers and $6,000 for joint filers). This is a positive change for higher income Medicare beneficiaries. However, the additional premium by tier is increasing for 2025. For example, the adjustment for Tier 1 is $74, up from $69.90 in 2024. The top tier, with income greater than or equal to $500,000 (Single)/$750,000 (Joint), will be $443.90 compared to $419.30.

Annual Gift Exclusion

For those of you making gifts to children, the amount you can gift without filing a gift tax return will increase to $19,000 per person. This means that a couple can gift an individual $38,000 per year without filing a gift tax return.  For questions on your specific situation, please reach out to your primary advisor. As always, we are here for you. Please email or call if you want to set up a meeting or talk by phone.

Mary McCraw, CFP®

© 2024 The Arkansas Financial Group, Inc., All rights reserved.

The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc. [“AFG]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from AFG. AFG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the AFG’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.arfinancial.com.

Please Remember: If you are a AFG client, please contact AFG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.