Saving for retirement will get a modest boost in 2025 thanks to higher contribution limits and the phase-in of provisions stemming from the Secure 2.0 Act, which became law at the end of 2023.
For retirees, there are also changes for Social Security and Medicare worth noting.
Here’s a roundup of some of the key retirement-related changes to watch for in the new year.
Higher saver contribution limits
Employer-sponsored retirement plans come with sizable contribution limits — not that everyone can spare to set aside that much — and they’re increasing slightly. For 2025, you’ll be able to increase your annual contribution to your 401(k), 403(b), governmental 457 plans, and the federal government's Thrift Savings Plan to $23,500, up from $23,000.
The catch-up contribution limit, for those 50 or older, is holding steady at $7,500. There’s an extra layer of icing for workers aged 60 to 63, thanks to the Secure 2.0 law — a higher catch-up contribution limit of $11,250.
“People at this life stage often have college funding in the rearview mirror, so if they're in the position to turbocharge their retirement plan contributions in advance of retirement, they should take advantage of it,” Christine Benz, director of personal finance and retirement planning for Morningstar, told Yahoo Finance.
The contribution limit on individual retirement accounts (IRAs) will stick at $7,000, and the catch‑up contribution limit for individuals 50 and over stays at $1,000 for 2025.
IRA deductions for singles covered by a retirement plan at work phases out for modified adjusted gross income (MAGI) between $79,000 and $89,000, up from $77,000 to $87,000. The deduction gradually disappears for married couples filing jointly between $126,000 and $146,000, up from $123,000 to $143,000.
Some good news for Roth IRA fans: The income limit range for contributing will increase to between $150,000 and $165,000 for singles and heads of household, up from $146,000 to $161,000. For married couples filing jointly, the range increases to between $236,000 and $246,000, up from $230,000 to $240,000.
Finally, the income limit for the Saver’s Credit, a nonrefundable tax credit worth up to $1,000 ($2,000 if married filing jointly) for taxpayers who contribute to a retirement account is $79,000 for married couples, up from $76,500; $59,250 for heads of household, up from $57,375; and $39,500 for singles and married individuals filing separately, up from $38,250.
The new 2025 annual limit for a health savings account will be $4,300, up from $4,150. (Getty Creative) ·FatCamera via Getty Images
Healthcare savings accounts
How much you can contribute to your health savings account or HSA — considered an important retirement tool by financial advisers — nudges up a hair.
The new 2025 annual limit for individuals will be $4,300, up from $4,150. For family coverage, the HSA contribution limit rises to $8,550 from $8,300 this year.
While these accounts are not meant to substitute for your traditional retirement account, HSAs offer a retirement benefit down the road thanks to their triple tax advantage. You put money in on a tax-free basis, it builds up tax-free, and it comes out tax-free for qualified healthcare expenses. That said, for now, “investing in a health-savings account — rather than spending from it — is the best way to harness the big tax benefits that come along with an HSA,” Benz said.
One caveat: You must be enrolled in a high-deductible healthcare plan (HDHP) in order to contribute to an HSA. You can also open an account as a self-employed freelancer or business owner if you have a qualified HDHP.
Social Security benefits
The cost-of-living adjustment (COLA) increase in Social Security benefits next year will be small. The Social Security Administration (SSA) announced a 2.5% cost-of-living adjustment (COLA) for 2025. That’s down from 3.2% this year but in line with the 2.6% average over the past two decades.
Starting in January, the increase will add a little under $50 to the average monthly benefit of roughly $1,900.
Heftier Medicare premiums will take a bigger bite out of those retirement checks.
The Centers for Medicare and Medicaid Services (CMS) announced that 2025 monthly Part B premiums will climb to $185, an increase of $10.30. And the annual Part B deductible, which most people must pay before their Medicare coverage begins, will rise by $17 to $257.
Social Security field offices: Call first
Starting Jan. 6, the SSA will require anyone who wants to speak face-to-face with a person to schedule an appointment.
Customers who are not able to handle their business online or over the phone can call their local Social Security office or national phone contact to schedule an appointment. There are currently 1,200-plus field offices.
“We want to make clear that we will not turn people away for service who are unable to make an appointment or do not want to make an appointment,” Dawn Bystry, SSA associate commissioner, wrote on the agency’s website. “By scheduling appointments, we will aim to reduce wait times, streamline service delivery, and improve the overall customer experience.”
Is your full retirement age here?
In 2025, the age at which you become eligible to claim 100% of the retirement benefit calculated from your lifetime earnings will arrive for people born May 2, 1958, through Feb. 28, 1959. That’s known as your Full Retirement Age or FRA. Under current law, it will settle at 67 for people born in 1960 and afterward.
You can start collecting retirement benefits before your FRA, at age 62, but your monthly check will be permanently reduced, by as much as 30%.
If you can push back tapping your benefits from your FRA until age 70, you’ll earn delayed retirement credits. Those come to roughly an 8% annual increase in your benefit for each year until you hit 70. The credits stop accruing at that point, but the heftier checks remain for the rest of your life.
The Social Security Administration office is seen in Mount Prospect, Ill., Oct. 12, 2022. (AP Photo/Nam Y. Huh) ·ASSOCIATED PRESS
Social Security taxes
Social Security is primarily funded by payroll taxes, currently 12.4%, split evenly between employees and employers. If you earn wages, you pay 6.2% (through FICA withholding from your paycheck) and your employer pays 6.2%. Self-employed people pay both shares as part of their annual tax return.
The amount of income subject to the tax is adjusted annually. In 2025, you’ll pay the tax on work income up to $176,100 (up from $168,600 in 2024). Earnings above that threshold are not taxed for the purpose of funding Social Security, nor is any income from investments.
Auto-enroll is mandatory
Starting in 2025, 401(k) and 403(b) plans established after Dec. 29, 2022, must automatically enroll all eligible employees at a default deferral rate of between 3% and 10% of their salary, and the rate must increase every year by 1%, until the participant hits at least 10%, and no more than 15%.
Automatic enrollment does not mean you have to go along with it. Workers can change the rate or opt out.
Long-term, part-time employees
A core provision in the Secure 2.0 Act revised the eligibility requirements for long-term, part-time employees. Employees who worked at least 500 hours a year for two consecutive years are now eligible for an employer-provided 401(k) plan.
Inheriting money is great, but the tax man cometh sooner than ever before.
Starting in 2025, if you inherited an individual retirement account after 2019, you must take required withdrawals each year until the account is cleaned out in the 10th year after the original account owner’s death. The rule applies to most non-spousal beneficiaries if the original account owner had reached their required minimum distribution (RMD) age prior to their death.
Until now, you could “stretch” inherited IRA withdrawals over your lifetime, which helped trim the annual tax bill due on those funds.
If you miss yearly RMDs or don’t take enough, there’s a 25% penalty on the amount you should have withdrawn.
