We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for January 6, 2025
Radon and Murs discuss key updates to the important financial numbers for 2025 that impact tax planning, retirement contributions, and other critical aspects of financial planning. They explain how inflation adjustments have influenced tax brackets, 401(k) and IRA contribution limits, Medicare IRMAA thresholds, and more….
Each year brings adjustments to important metrics such as tax brackets, contribution limits, and Social Security benefits. These changes are often driven by inflation and economic factors, making it crucial to understand how they affect your financial strategy. Below, we’ll break down the vital updates for 2025 to help you navigate the year with confidence.…..
As we step into 2025, it’s essential to stay informed about key financial updates that could impact your planning for the year ahead. Each year brings adjustments to important metrics such as tax brackets, contribution limits, and Social Security benefits. These changes are often driven by inflation and economic factors, making it crucial to understand how they affect your financial strategy. Below, we’ll break down the vital updates for 2025 to help you navigate the year with confidence.
Tax Brackets for 2025
The tax rates for 2025 remain the same as in 2024, with the U.S. maintaining a progressive tax system. What’s changed, however, are the income thresholds for each bracket, adjusted for inflation. Here’s an overview for married filing jointly:
10% bracket: Income up to $23,850
12% bracket: Income between $23,851 and $96,950
22% bracket: Income between $96,951 and $206,700
24% bracket and above: Brackets follow accordingly
For single filers, the thresholds are detailed in a companion document available upon request. These adjustments provide opportunities for better retirement tax planning, especially when managing withdrawals or considering Roth conversions.
Long-Term Capital Gains Tax Rates
If you’re planning to sell assets held for over a year, such as stocks or property, understanding long-term capital gains tax rates is critical:
0% rate: Income below $96,700 (married filing jointly)
15% rate: Income between $96,701 and $600,000
20% rate: Income above $600,000
Strategically planning the timing of asset sales can optimize tax outcomes, especially if your income fluctuates during retirement.
Standard Deductions
The standard deduction for 2025 has increased slightly:
Married filing jointly: $30,000 (up from $29,200 in 2024)
Single filers: $15,000
Additional deductions apply for those aged 65 or older or who are blind: $1,500 for married individuals and $2,000 for single filers.
These adjustments can impact whether you choose to itemize deductions or take the standard deduction, affecting your overall tax liability.
Social Security Updates for 2025
Recipients of Social Security benefits will see a 2.5% cost-of-living adjustment (COLA) starting in January 2025. Other key considerations include:
Full Retirement Age (FRA): For individuals born in 1960 or later, the FRA is 67.
Earnings limit for early retirees: $23,400. Earnings above this amount may reduce your benefits.
Taxability of benefits: Married couples with income above $32,000 or singles above $25,000 may have up to 85% of their benefits taxed.
These updates emphasize the importance of including Social Security in your overall retirement planning strategy.
Medicare IRMAA and Premiums
Medicare IRMAA (Income-Related Monthly Adjustment Amount) affects higher-income individuals. For 2025, the income threshold for IRMAA surcharges starts at $212,000 (married filing jointly), up from $206,000 in 2024. If your income exceeds this amount:
Part B premium surcharge: Begins at an additional $74/month
Part D premium surcharge: Starts at $13.70/month
These surcharges are based on your modified adjusted gross income (MAGI) from two years prior (2023 income for 2025 premiums). Proper planning can help manage these costs, particularly if you’re executing strategies like Roth conversions.
Retirement Contribution Limits
Retirement savings accounts have seen increased contribution limits for 2025, allowing you to boost your savings:
401(k) and Similar Plans
Standard contribution limit: $23,500 (for individuals under 50)
Catch-up contribution (50 and older): Additional $7,500
Ultra catch-up contribution (ages 60-63): $11,250 (replaces the $7,500 catch-up)
Traditional and Roth IRAs
Standard contribution limit: $7,000
Catch-up contribution (50 and older): Additional $1,000
Catch-up contribution (55 and older): Additional $1,000
These increased limits are vital tools for enhancing your retirement savings strategies and securing a comfortable future.
Required Minimum Distributions (RMDs)
For individuals turning 73 in 2025, required minimum distributions (RMDs) begin. RMDs apply to traditional IRAs and 401(k)s and must be withdrawn annually to avoid significant penalties. Consulting your financial advisor to plan these distributions efficiently is critical to your retirement tax planning efforts.
Estate Tax Exemption
The estate tax exemption for 2025 is $13,990,000 per individual. This generous exemption allows most estates to avoid federal estate taxes. However, proactive estate planning ensures your assets are distributed according to your wishes.
Final Thoughts on 2025: Important Financial Numbers
Navigating the financial updates for 2025 can be complex, but staying informed is the first step in securing your financial future. From tax brackets 2025 to IRA contribution limits 2025, these adjustments offer opportunities for more strategic retirement planning and wealth management.
If you want to understand all this a little better, we offer a complimentary phone call that you can schedule with us on our website. If we can’t answer all your questions in just 15 minutes, we’ll guide you to the next steps to find the answers you need.
