In the blink of an eye, we’ll say goodbye to 2024. Then come the Holidays and time spent with family and friends, cooking elaborate meals, shopping and welcoming in the New Year. It's no wonder you haven't had time to think about your year-end finances. The good news is, you still have time.
In some ways, the coming new year may serve as a reminder of all the things we meant to accomplish but didn’t, like maximizing your savings or donating to charity. On the other hand, the end of the year can serve as a motivator for getting your 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 seven retirement moves to make before 2025.
1. 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. In 2025, the full retirement age will be 66 years and 10 months. For those who turned 66 in 2024, FRA is 66 years and eight months.
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
This decrease is typically permanent. 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. Savings accounts
The interest you earn on your deposits decreases 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 you have your money in a standard savings account earning less than 1%, this is an excellent time to switch 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. 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. Taxes
For 2025, the IRS made some changes and adjustments to standard deductions, tax brackets, earned income tax credits, contributions to health savings plans 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. Just a few changes we outline here include:
Earned Income Tax Credit: For qualifying taxpayers who have three or more children, the tax year 2025 maximum Earned Income Tax Credit amount will be $8,046. That’s an increase of $216 from 2024.
Health savings accounts: 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. 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.
Estate tax credits: Estates have a basic exclusion amount of $13,990,000 in 2025, an increase from $13,610,000 for estates of decedents who died in 2024.
Annual exclusion for gifts: This amount increases to $19,000 in 2025, up from $18,000 in 2024.
More information regarding all tax changes in 2025 can be found on the IRS website.
5. Required minimum distributions (RMDs)
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.
6. 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.
7. 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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