What’s Changing in 2025?

While a new year is often symbolic of change or exciting beginnings, it takes on a slightly different meaning when it comes to your financial life. On January 1, many aspects of your financial world essentially “reset” or re-adjust to accommodate inflation. From how much you contribute towards retirement to your anticipated tax bracket, there are a number of important facts and figures to familiarize yourself with now as we embark on a new year ahead.

2025 is an especially important year to pay close attention to, as certain legislation is going into effect while others are preparing to sunset.

Let’s take a look at what’s changing for 2025 in your financial world.

401(k) Contributions

If your workplace offers an employer-sponsored retirement plan, it’s likely in the form of a 401(k), 403(b), 457 plan, or a Thrift Savings Plan (TSP).

Your contributions to these accounts are tax-deferred, which means you can deduct them from your taxable income the year they’re made. Any investment growth or earnings that happen within the account are able to grow tax-deferred as well, meaning you won’t be required to pay ordinary income tax until you make withdrawals (ideally in retirement).

That being said, there are limits to how much you can contribute each year. For 2025, the limit rises to $23,500 per taxpayer.¹

It’s worth noting that the combined contribution limit is much higher, rising to $77,500 for 2025.¹ This is the total contribution limit for your 401(k) including:

• Your pre-tax contribution (up to $23,500)
• Employer matching contributions
• After-tax contributions (if you plan on making any, keep in mind these aren’t tax-deductible)

401(k) Catch-Up Contributions

If you’re 50 or older, the IRS allows you to make additional contributions to your 401(k) or other employer-sponsored plan—aptly named, “catch-up” contributions. 

Similar to normal contributions, these are also adjusted annually for inflation. In years with relatively low inflation, the IRS may choose not to offer an adjustment at all. For 2025, those who are 50 and older can contribute an additional $7,500 to their employer-sponsored plan, bringing the grand total of contributions up to $31,000 (the initial $23,500 plus $7,500 in catch-up contributions).¹ 

In years past, that would be the end of the story. But thanks to the SECURE 2.0 Act, passed in late 2022, some plan participants are getting an additional advantage starting in 2025. 

Here’s what’s new: If you’re between the ages of 60 and 63 (by the end of the calendar year), you may contribute either: $10,000 or 150% of the catch-up contribution, whichever is greater.¹  

For 2025, the higher catch-up contribution limit is $11,250 (150% of $7,500). 

All in, those between 60 and 63 can contribute a total of $34,750 ($23,500 + $11,250).

Speaking of 401(k)s…

Automatic enrollment is coming (with a few exceptions, of course).

Yet another change put into place by the SECURE 2.0 Act, 401(k) (or similar) plans established on or after December 29, 2022 will be required to implement auto-enrollment features starting this year.

Employers must set the initial auto-enrollment amount to at least 3% of an employee’s pay, though the limit is capped at 10%. Every year after the initial auto-enrollment, the employer will automatically increase the contribution amount by 1%, until it reaches 10% (though it cannot exceed 15%).²  

There are a few exceptions to this new policy, meaning businesses that meet the following criteria won’t be required to implement automatic enrollment:² 

• Has fewer than 10 employees
• Plan was established before December 29, 2022 (when the SECURE 2.0 Act was passed)
• Has operated for three years or less
• Offers a SIMPLE 401(k) or a government or church plan (typically these are 457s)

Now, what does all this mean for you?

First, auto-enrollment in a retirement savings plan can make it easier for you to build more retirement savings without even thinking about it (especially since the auto-enrollment is set to adjust each year). 

However, auto-enrollment doesn’t mean you’re required to participate if you don’t want to. Rather, you’ll just need to manually opt out by changing your contribution rate to 0%. 

IRA Contributions

If you’re building your retirement savings outside of a workplace plan, you may be using either a traditional or Roth IRA (individual retirement account). 

Contribution limits for IRAs stay the same in 2025, with a maximum contribution limit of $7,000. Catch-up contributions remain unchanged as well at $1,000, for a total of $8,000 if you’re 50 or older.¹ 

Keep in mind, if you or your spouse are given the option to participate in a workplace plan (like a 401(k)), your ability to contribute to an IRA (and receive the tax deduction) will depend on your modified adjusted gross income (MAGI).

The IRS establishes MAGI “phase-out ranges” for taxpayers. If your MAGI falls within the phase-out range, you may contribute a reduced amount. If your MAGI exceeds the phase-out range, you are not eligible to make contributions to an IRA and deduct them from your taxes. Keep in mind these limits only apply if you or your spouse have the option to contribute to a workplace plan. If that’s not the case for you and your family, the income limit doesn’t apply.

Here are the 2025 phase-out ranges for traditional IRAs:¹

SIMPLE IRA and SIMPLE 401(k)

If you own or work for a small business with fewer than 100 employees, your workplace may offer a Savings Incentive Match Plan for Employees—or a SIMPLE IRA or 401(k).

In 2025, the contribution limit for a SIMPLE plan is $16,500. Catch-up contributions for those 50 and older will stay the same at $3,500, for a total of $20,000 (if you’re 50 or older).³ 

However, those between the ages of 60 and 63 can take advantage of the new catch-up rule that applies to 401(k)s and 403(b)s. If you fall into this age group, your catch-up contributions can be either $5,000 or 150% of the catch-up contribution limit, whichever is greater. For 2025, this means the maximum catch-up contribution limit is $5,250 (150% of $3,500).³ In total, you may be able to contribute up to $21,750.

Roth IRA Income Limits

As we mentioned earlier, you may contribute either $7,000 or $8,000 if you’re over 50 to a Roth IRA in 2025.¹ 

Remember, contributions to Roth accounts are not tax-deferred—meaning they won’t reduce your taxable income for the year. The trade-off? Investment growth or earnings within the account grow tax-deferred, and qualified withdrawals are tax-free. 

The kicker with Roths, however, is that the IRS does implement income limits. Similar to traditional IRAs, you may be eligible to contribute a reduced amount to your Roth IRA if your MAGI falls within the “phase-out range.” If you exceed the ceiling limit, you will not be eligible to contribute to your Roth IRA at all. 

Here are the 2025 MAGI phase-out ranges for contributing to a Roth IRA:¹

Let’s Talk About Taxes for 2025

Each year, the marginal tax rates (your “tax bracket”) are adjusted for inflation. The standard deduction often experiences an inflation adjustment as well. 

Let’s start with how the standard deduction is changing. For 2025, the new standard deduction rates increase to:⁴ 

• Single & married filing separately: $15,000
• Head of household: $22,500
• Married filing jointly: $30,000

As was the case in previous years, you do have the option to take itemized deductions instead, and there is no limit to how much you may deduct when itemizing.

Now, onto tax rates.

Here are the updated tax rates for the 2025 tax year (remember, these apply to the tax returns you’ll be filing in early 2026, not early 2025):⁴

Another important reminder? The U.S. operates on a progressive tax rate system—which can lead to some confusion surrounding total tax liability.

Let’s say your taxable income (after the standard deduction) is $120,000 as a single filer. This means it falls into the 24% tax rate—however, this doesn’t mean your entire taxable income is taxed at 24%.

Rather, each portion of your income falls into a corresponding tax bracket, based on the table above. Here’s how your income would actually be taxed in 2025:

• The first $11,925 is taxed at 10%.
• The next $36,548 is taxed at 12%.
• The next $54,874 is taxed at 22%.
• And the final $16,650 is taxed at 24%.

This is a bit of an oversimplification of the tax system, but it should serve as a reminder that your “tax rate” is not a reflection of your total tax liability.

A Note About the Tax Cuts and Jobs Act

Many tax-related provisions, including today’s historically high standard deduction and estate tax exemption limit, are part of the 2017 Tax Cuts and Jobs Act. Unless further legislative action is taken, the original provisions are set to expire at the end of 2025. 

As you build out a tax strategy or consider your estate plan in the coming years, it may help to keep this in mind—as deductions, exemptions, and limits could change in the coming year. 

Ready for 2025?

With a new year comes exciting opportunities, and that goes for your financial life as well. Perhaps now’s a great time to reassess your retirement contributions, speak to your tax professional about proactive tax planning strategies, or otherwise get your financial house organized for the year ahead.