Strategies for Boosting Your Retirement Nest Egg
In the ever-evolving landscape of personal finance, it's essential to stay informed about the changes and opportunities available for retirement savings and health expenses. Here's a rundown of key updates for 2025 regarding 401(k)s, IRAs, Health Savings Accounts (HSAs), and Roth IRAs.
401(k)s and Employer-Sponsored Plans
For 2025, the standard contribution limit for 401(k)s and similar employer-sponsored plans stands at $23,500. For individuals aged 50 or older, the contribution limit increases to $31,000, with an additional $7,500 catch-up contribution. Notably, employees aged 60 to 63 can contribute a super catch-up of $11,250, allowing for a maximum contribution of up to $34,750.
Starting in 2026, workers aged 50 or older who earned $145,000 or more in the previous year will have to put catch-up contributions to Roth 401(k) plans.
IRAs (Traditional or Roth)
The standard contribution limit for traditional and Roth IRAs remains at $7,000 in 2025, with an additional $1,000 catch-up contribution for individuals aged 50 or older, resulting in a maximum contribution of $8,000.
Contributions to a Roth IRA phase out for incomes between $150,000-$165,000 (single) or $236,000-$246,000 (married, filing jointly), and no contributions are allowed once income reaches $165,000 (single) or $246,000 (married, filing jointly).
Health Savings Accounts (HSAs)
HSAs offer unique advantages, as contributions are pretax and can be up to $4,300 for individual coverage or $8,550 for family coverage in 2025, with an additional $1,000 catch-up contribution for those aged 55 or older.
Unlike IRAs, there are no required minimum distributions for HSAs, allowing the funds to grow throughout retirement. Funds in an HSA grow tax-free, and withdrawals are tax-free as long as the money is used for eligible health care expenses.
HSAs can be used to pay for medical costs that Medicare doesn't cover, as well as monthly premiums for Medicare Part B and Part D and Medicare Advantage plans. Additionally, a portion of long-term-care insurance premiums can be paid using HSA distributions, with the amount depending on your age.
Roth IRA Income Phase-Out
For those considering a Roth IRA, eligibility to contribute the full limit phases out at higher Modified Adjusted Gross Income (MAGI):
- For single filers, the ability to contribute fully begins to phase out above $150,000 and cuts off completely at $165,000.
- For married couples filing jointly, the phase-out range is between $236,000 and $246,000.
If your income exceeds these upper limits, you cannot contribute directly to a Roth IRA, but alternatives like a backdoor Roth IRA might be worth exploring.
In summary, the updates for 2025 provide older savers with more opportunities to put aside funds for retirement, especially those closer to retirement age. By understanding the changes and advantages offered by each account type, individuals can make informed decisions about their financial future.
In the realm of personal finance and retirement planning, investing in 401(k)s and Roth 401(k)s becomes more advantageous for those aged 50 or older, with catch-up contribution limits increasing in 2025 and an additional super catch-up option for those aged 60 to 63. On the other hand, in the field of finance and personal-finance, contributions to a Roth IRA might be limited due to income phase-outs, with eligibility phasing out above $150,000 for single filers and between $236,000 and $246,000 for married couples filing jointly.
