With the new year underway, there are several important changes to tax laws, Social Security, and retirement planning that might affect your financial strategy. Let’s take a closer look at some of the most potentially impactful updates.
Social Security Gets a Refresh
First, some good news: Social Security benefits are getting a 2.5% boost in 2025. While this increase isn’t as dramatic as we’ve seen in recent years, it will help maintain purchasing power as inflation moderates.
And there’s even better news for some public sector workers: The recently passed Social Security Fairness Act eliminates two provisions that previously reduced benefits for many teachers, firefighters, and other government employees. If you or a family member works in the public sector, this could mean a welcome increase in Social Security benefits.
Tax Changes on the Horizon
The IRS has made its usual inflation adjustments for 2025; the standard deduction is now $15,000 for single filers and $30,000 for married couples filing jointly. However, here’s something to keep on your radar: many provisions of the Tax Cuts and Jobs Act are set to expire after 2025. This could mean significant changes to tax rates and deductions in 2026.
For those thinking about estate planning, keep in mind that the federal estate tax exemption has increased to $13.99 million per person. But like the other tax changes, this higher exemption is temporary and scheduled to decrease significantly after 2025 unless Congress takes action.
Retirement Planning Updates
Several new provisions from the SECURE 2.0 Act kick in this year:
- If you’re between 60 and 63, you can make larger catch-up contributions to your retirement plans (at least $11,250 for 401(k)s and similar plans)
- New 401(k) and 403(b) plans must automatically enroll eligible employees
- Some retirement plans can now add emergency savings accounts (up to $2,500 annually) as a Roth account option
One piece of good news for retirees: The IRS has delayed implementing new Required Minimum Distribution (RMD) regulations until 2026, giving us more time to prepare for those changes.
Implications for Your Financial Future
With so many changes happening (and more on the horizon), now is a great time to review your financial strategy. You might want to consider:
- Whether to accelerate income or consider Roth conversions before potential tax changes in 2026
- How to take advantage of the current estate tax exemption if you have a larger estate
- Whether to boost your retirement contributions, especially if you’re in the catch-up contribution age range
Remember, these are just general guidelines; your specific situation might require a different approach. If you have questions or concerns, or you’d just like to discuss how these changes might impact your financial plan, reach out to your advisor to set up some time to talk!
This material is distributed for informational purposes only. Investment Advisory services offered through Journey Strategic Wealth, a registered investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). The views expressed are for informational purposes only and do not take into account any individual’s personal, financial, or tax considerations. Opinions expressed are subject to change without notice and are not intended as investment advice. Past performance is no guarantee of future results. Please see Journey Strategic Wealth’s Form ADV Part 2A and Form CRS for additional information.
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