Miniseries
Leverage the 401(K) ‘Super Catch-Up’ for 2025
Investors can save more with higher 401(k) plan limits in 2025. 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. However, thanks to Secure 2.0, there’s a “super catch-up” for investors ages 60 to 63, allowing them to contribute an additional $11,250, bringing the total deferral limit to $34,750.
This could be huge for deferring taxes in 2025, said certified financial planner Michael Espinosa, president of TrueNorth Retirement Services in Salt Lake City. Some 15% of eligible participants made catch-up contributions in 2023, according to Vanguard’s 2024 How America Saves report.
Avoid a Penalty for Inherited IRAs
Inherited individual retirement accounts could boost your nest egg, but some heirs may face an IRS penalty for missed required withdrawals in 2025. 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.
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 The penalty is 25% of the amount that should have been withdrawn. However, 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.
Social Security Benefit Change is ‘Significant’
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. The Social Security Fairness Act ended two provisions 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.
