In the blink of an eye, we’ll say goodbye to 2024. And, as we do most every year, we'll sit down and make the same New Year's resolutions, like eating healthier and getting more sleep. Yet we often overlook our year-end finances and doing what we can now to get our house in order, financially.
If you’re plagued with the gene of procrastination (like most of us), there are several tasks you can’t afford to put off — like these 10 retirement moves to make before 2025.
1. Take your Social Security
Many retirees depend on social security when they retire. That’s why it pays to be strategic about when to claim your first check. If you’ve worked long enough to earn 40 credits, one credit equaling $1,730 in earnings, with a maximum of four credits earned each year, you can apply for Social Security as early as 62.
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However, delaying your Social Security benefit from age 62 to 70 can boost your payout by up to 8% yearly. That alone can result in a 76-77% higher benefit at age 70. Another strategy, the 62/70 split, which works incredibly well for married couples, can also increase your benefit beyond delaying your benefit. In this case, the spouse earning the lower wage starts benefits at age 62, while the higher-earning spouse delays receiving benefits until 70. In turn, the higher earner receives a spousal benefit while waiting, increasing both their own and the potential survivor benefits for the other spouse.
Check out Kiplinger’s article: Three changes coming for Social Security in 2025.
To claim the full benefit you’ve earned based on your work history, you must wait until your full retirement age (FRA). Your FRA is based on your birth year. If you were born in 1958, your full retirement age will be 66 and 10 months. If you were born after 1960, your For those FRA is 67.
Here is when you will reach your FRA by birth year:
- If you were born in 1958, your FRA is age 66 and eight months and was reached in 2024
- If you were born in 1959, your FRA is age 66 and 10 months and is reached in 2025
- If you were born in 1960 or later, your FRA is age 67 and will be reached in 2026 and after
If you claim Social Security before your FRA, you could lose:
- 5/9 of 1% per month for up to 36 months of early claiming
- 5/12 of 1% per month for every additional month of early claiming beyond 36 months
You can also delay claiming Social Security beyond your FRA. In that case, your checks will grow by 1% per month. This ends when you qualify for your maximum benefit at 70. However, if you have a serious health issue or you can’t afford to wait to earn Social Security, you may want to apply early. Once you know how much you’ll earn in Social Security benefits, you can figure out how much income you’ll need from other sources to cover your expenses in retirement.
2. Bump up your savings
The interest you earned on your savings deposits may have decreased a bit when the Federal Reserve cuts interest rates, which it has done in its last two policy-setting meetings. However, rates on deposits are still tempting. Many high-yield savings accounts pay upwards of 4% and higher annual percentage yields (APYs). Most of these accounts also charge no monthly fees and have no minimum balance requirements. If your money is in a standard savings account earning less than 1%, this is an excellent time to switch your accounts to a federally insured (up to $250,000 per depositor) bank or credit union.
Another option is opening a money market account. Both savings and money market accounts earn interest, but MMAs typically offer debit cards and the ability to write a few monthly checks, while savings accounts don’t. However, MMAs can limit the number of withdrawals per month, so if you go over that limit, you may be charged a fee. Like high-yield savings accounts, some MMAs are offering rates over 4%. That means more money in your pocket to spend in your glory years.
3. Revisit your retirement accounts
The Internal Revenue Service has recently released the new 2025 contribution limits for 401(k) and IRA accounts, as well as other retirement plans. The new contribution limits are among the changes coming to IRAS and 401(k)s in 2025.
401(k)s
The amount you can contribute to your 401(k) plan has increased from $23,000 in 2024 to $23,500 in 2025. The limit on annual contributions to an IRA remains at $7,000, and the IRA catch‑up contribution limit for people 50 and over will stay at $1,000 for 2025.
Effective for the 2025 tax year, active 401(k) plan participants aged 60 through 63 can contribute over $10,000 or 150% of the 2024 catch-up contribution limit (indexed for inflation) in a super catch-up as a result of SECURE 2.0 legislation. For 2025, the maximum catch-up contribution is $11,250. In 2025, the total limit for 401(k) contributions for anyone aged 60 to 63 is $34,750. That number includes the $23,500 contribution limit and a catch-up contribution of $11,250. If you’re an account holder, you can take advantage of this additional catch-up contribution before the end of the year.
IRAs
The base IRA contribution limit remains unchanged at $7,000 in 2025. However, the income ranges for determining eligibility have increased as follows:
- For single taxpayers covered by a workplace retirement plan, the phase-out range for IRA deductions will be $79,000 to $89,000.
- For married couples filing jointly, and if you have a workplace retirement plan that covers the spouse making the IRA contribution, the phase-out range will be $126,000 to $146,000.
- The income phase-out range for taxpayers contributing to a Roth IRA will be $236,000 to $246,000 for married couples filing jointly. It will be $150,000 to $165,000 for singles and heads of household.
- The limitation regarding SIMPLE retirement accounts is increased from $16,000 to $16,500.
Contribution limits on a variety of other retirement accounts will rise in 2025, including Roth IRAs, SEP IRAs, Solo IRAs and others. Details on these and other retirement-related cost-of-living adjustments for 2025 are in Notice 2024-80 PDF, available on IRS.gov.
4. Get a handle on taxes
For 2025, the IRS made some changes and adjustments to standard deductions, tax brackets, earned income tax credits and more. Although only some of these changes will apply to your situation, if you plan to make a change, like getting married or divorced, it pays to understand these changes before the year ends.
Earned Income Tax Credit: While the earned income tax credit is a refundable credit for low- to middle-income workers, it can also apply to retirees. For the 2024 tax year — taxes filed in 2025 — the earned income tax credit spans from a max of $632 to $7,830, depending on income, tax filing status and the number of children you have. For qualifying taxpayers with three or more children, the tax year 2025 maximum Earned Income Tax Credit will be $8,046. That’s an increase of $216 from 2024.
Estate tax credits: Unless you hit a certain exemption amount, you won't have to worry about the federal estate tax. That amount is $13.99 million (up from $13.6 million last year) for people who pass away in 2025. The exemption for married couples will be $27.98 million (up from $27.22 million last year).
Federal estate tax rate: Because the exemption is so high for 2025, only a small percentage of estates will be subject to federal estate tax. However, estates valued over $1 million ($14,990,000 or $28,980,000 combined for married couples) will be taxed at 40%.
More information regarding all tax changes in 2025 can be found on the IRS website.
5. Check out a health savings account
Health savings accounts, or HSAs, are individually owned tax-advantaged accounts that let you save pre-tax dollars for future qualified medical expenses. They are paired with an HSA-eligible health plan. An HSA helps you save on copays, prescriptions, eyeglasses, dental care, x-rays, bandages and a lot more, and can be used to pay for both current medical expenses and expenses in retirement.
It may be possible to enroll in an HSA-eligible plan through your health insurance company, your current health provider or your bank. You can also get more information at HealthCare.gov.
For the tax year 2025 (self-only coverage), you must have an annual deductible of at least $2,850 but not more than $4,300 on your health savings account. Plus, the maximum out-of-pocket expense amount will increase to $5,700 from $5,550 in 2024.
For family coverage, the annual deductible will be at least $5,700. However, the deductible can be up to $8,550 in 2025. Also for family coverage, the out-of-pocket expense limit is $10,500 for 2025, up from $10,200 in 2024.
If you make a withdraw for a non-medical expense, it will be treated very similarly to one taken in an individual retirement account (IRA). An HSA may provide tax advantages if taken after retirement age, but will incur penalties if taken earlier.
6. Give money to your children
The custom of exchanging gifts during the holiday season goes back to the Victorian age and ancient Roman merrymaking. However, many retirees don't wait for the holidays to give their children money through both direct cash payments and sophisticated trusts. Gifting can be an excellent move to make before the end of the year and an addition to your estate planning goals in 2025.
Just think of the personal satisfaction you'll get knowing you helped your kids buy a home or your grandkids go to college. Just make sure you can pay for your expenses and that your needs are taken care of first.
Before gifting money or other assets, be aware of the potential tax consequences. For 2024, the annual gift tax limit is $18,000, up $1,000 from 2023. For married couples, the combined 2024 limit is $36,000. In 2025, the annual gift tax exclusion will rise to $19,000 per recipient. Married couples can double this amount to $38,000 per recipient. In addition, the lifetime estate and gift tax exemption will increase to $13.99 million per recipient for 2025, up from $13.61 million in 2024.
7. Take your RMD if required
If you're required to take your required minimum distribution (RMD) from your retirement account, you'll want to do so before year-end to avoid paying a penalty. An RMD is the amount of money you must withdraw each year from your employer-sponsored retirement plans like 401(k)s and certain IRAs. You must take your RMD after you turn 73 years old and every year after that or face a tax penalty. RMDs do not apply to Roth accounts until after the account owner dies.
8. Update your will and other legal docs
Even if it's been 30 years since you last updated your estate plan, changes to your family, taxes, and retirement accounts may mean it’s time to take another look before the end of the year. For instance, the amount you can leave your heirs without paying federal tax has increased to $13,610,000 for 2024 and will rise to $13,990,000 in 2025. If you’ve moved to a new state, the estate tax exemption for 2025 may be higher or lower than that amount.
Maybe you got divorced or married, or your children are now adults. Maybe it’s as simple as your wishes changing over time, or you want to designate someone to manage your healthcare directives or finances. Whatever your reasons for updating your estate plan, doing so before the end of the year will give you the satisfaction of knowing your wishes will be carried out upon your passing.
9. Rethink services and subscriptions
It’s not uncommon to take advantage of services that offer a few free months or credit cards that charge no interest on purchases if paid within a certain amount of time. Unfortunately, it is common to lose sight of these perks and pay for services we no longer use or shell out higher interest on a card. Before the end of the year, go back over all the services you use, such as streaming services, cable TV, magazine subscriptions and even coffee clubs. Do you still use these services? If not, cancel them now.
If you applied for a credit card with an introductory 0% interest rate on all your purchases for six months, revisit your agreement and make sure the six-month promotion hasn't expired. If it has, you will pay a much higher interest rate, possibly 28.75% or higher, on all future purchases. If you make a late payment during the promotional period, you might also get slapped with a penalty APR. Paying off all purchases within the promotional period can help you avoid ending up in more debt than you began with.
10. Up your charitable giving
If you’re in a charitable mood, there are many tax benefits to take advantage of before the end of the year. But, to claim a tax-deductible donation, you must itemize on your taxes and you must have donated to an IRS-recognized charity as defined by section 501(c)(3) of the Internal Revenue Code. Plus, you cannot receive anything in return for your donation. That means that gifts to your family or friends or the donation you made to your uncle’s Kickstarter fund, are not tax-deductible.
As a rule, the amount of charitable cash contributions you can deduct as an itemized deduction on Schedule A is limited to a percentage, up to 60% of your adjusted gross income (AGI). In 2025, the percentage limit for charitable cash donations to public charities remains at 60%. Keep in mind that you may be limited to a percentage less than 60%, depending on the organization and type of contribution.
For any cash, checks or other monetary gifts you make, no matter the amount, you must keep a record — bank statement or written record — of your contributions. This must contain the name of the organization or charity, the amount and the date you made the donation.
If you donate property, like your home, to a qualified organization, you can generally deduct the property's fair market value. But remember, your contributions must also be made before the end of the year if you want the deduction to count for 2024.
The Internal Revenue Service also allows owners of IRAs who are 70-½ or older to transfer up to $100,000 to a qualified charity tax-free each year. These transfers are known as qualified charitable distributions or QCDs. What’s more, for anyone who is at least 73 years old, QCDs count toward the IRA owner's required minimum distribution (RMD) for the year.
Bottom line
If you’re scrambling to get your financial house in order before the end of 2024, you're heading in the right direction. Many people procrastinate (up to 20% of all adults) when it comes to retirement moves to make before the year’s end. Reach out to a financial planner if you’re unsure of what to do with your retirement accounts or other financial matters, or if you have questions. Don’t short-change yourself, especially considering the many changes coming in 2025.
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