As we approach the 2025 tax year, the IRS has announced updates that will impact retirement savings. Adjustments are primarily driven by inflation and include new contribution limits for certain plans.
While inflation is moderating, not all retirement plans will see changes, and some increases are modest compared to previous years. Let’s break down the key updates:
Social Security Earnings Test Increases
Many retirees working part-time while collecting Social Security face an earnings test if they’re under full retirement age. This test determines how much of their benefits may be withheld based on earnings. For 2025:
Younger than Full Retirement Age: Earnings limit rises to $23,400 (up from $22,320 in 2024). Benefits are reduced by $1 for every $2 earned above this limit.
Reaching Full Retirement Age in 2025: Limit increases to $62,160 (up from $59,520). Benefits are reduced by $1 for every $3 earned above the threshold until the month full retirement age is reached.
Full Retirement Age or Older: No earnings limit applies.
Retirement Plan Updates for 2025
401(k) and 403(b) Contributions:
Annual contribution limit: $23,500 (up from $23,000).
Standard catch-up contribution (age 50+): Remains $7,500.
New catch-up contribution (ages 60-63): $11,250 under the SECURE 2.0 Act.
IRA Contributions:
Annual contribution limit: Remains $7,000.
Catch-up contribution (age 50+): Remains $1,000.
Phase-Out Adjustments:
Traditional IRA Phase-Out:Single filers with MAGI: $79,000–$89,000. Married filing jointly: $126,000–$146,000.
Roth IRA Phase-Out:Married filing jointly: $236,000–$246,000. Single filers: $150,000–$165,000.
SAVER’S CREDIT AGI Limit:
Married filing jointly: $79,000 (up from $76,500).
Head of household: $59,250 (up from $57,375).
Single filers: $39,500 (up from $38,250).
Why These Changes Matter
Higher contribution limits and adjusted thresholds offer increased opportunities for retirement savings. Consult your tax advisor to make the most of these updates.
Need help planning your retirement contributions? Contact Verity CPAs at info@verity.cpa or 808.546.5026.
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