Financial planning: Look alive in ’25

As often happens, federal agencies have made some financial adjustments we all need to watch for in the coming year.

Social Security: Your income is going up again, although by a smaller amount than the past two years. Your cost-of-living adjustment (COLA) for 2025 is 2.5 percent. In 2023, there was a COLA of 8.7 percent due to high inflation, and 2024 was 3.2 percent, according to socialsecurity.gov. Note: This is a dream for complainers. If inflation is low, you can gripe about low COLA. If COLA is high, gripe about high inflation. A win-win.

Social Security earnings limit: If you have income from a job, and you’re receiving benefits before full retirement age (FRA), there is a limit on how much you can earn from work: $23,400 in 2025. (This does not include other sources of income like pension, IRA withdrawals, investment gains, etc.) If you earn more than that, SS will reduce your benefit amount.

For most people, it doesn’t make sense to start drawing SS if you’re still working full-time and under full retirement age. But part-time workers can carefully manage this to stay under the annual earnings limit. Your accountant and financial planner can help. Remember in Social Security world, FRA is the age you can earn any amount from work and still receive your full SS benefit. Your FRA is somewhere between 66 and 67.

Medicare: Part B premiums will be $185 in 2025, up from $174.40 in 2024.

Retirement accounts: You can now contribute more. In 2025, you can contribute up to $23,500 to your employer plan (like 401k) if you’re under 50. $31,000 if you’re 50 and up. In 2025, an additional provision kicks in for people ages 60-63. They can contribute an extra amount. It takes their maximum contribution to $34,750!

Most plans allow you to contribute either pre-tax or Roth money to your 401k. And unlike IRAs, there is no income limit. You can do pre-tax or Roth regardless of how much you make. Use that factoid to impress your friends at your next cocktail party.

For IRA contributions (both Traditional and Roth), the annual limit is $7,000 (under 50) or $8,000 (50 and up). Those numbers are unchanged from 2024.

Health Savings Accounts (HSA): If you are the only person on your health plan, you can contribute $4,300 in 2025, or $8,550 if you have family coverage. If you’re 55 or older, add an extra $1,000 to those numbers. Note: Whether you’re married or single doesn’t matter. It only depends on how many people are covered on your health plan.

Long-term care costs: According to the annual Genworth Cost of Care Survey, the average room at an assisted living facility in Jefferson City costs $5,779 per month. At a nursing home, a shared room is $6,007 per month, and a private room is $6,692. If you don’t have a plan for long-term care, let’s talk. Insurance coverage has come a long way in the past 10 years or so. This is one of my specialty areas, and it’s often overlooked in financial planning.

Travis Ford is a partner and financial planner at Wallstreet Group Advisors in Jefferson City. Contact him at 573-297-2049 or [email protected]. Securities and advisory services offered through CreativeOne Securities, LLC member FINRA/SIPC and an investment advisor. Wallstreet Group Advisors and CreativeOne Securities, LLC are not affiliated.