Planning Considerations for 2025

As we wrap up 2024 and look ahead to 2025, it’s a good time to review your savings goals and account distribution requirements for the coming year:

There is still time to maximize your tax advantaged accounts – the deadline for IRA & Health Savings Accounts (HSA) account contributions is the 2024 tax filing deadline – April 15^th, 2025.

• For IRA & Roth IRA accounts, the 2024 contribution limit is $7,000 (plus an additional $1,000 catch up if you’re over 50).
• Note that there are earned income requirements and income limits for Roth IRA contributions and deductible IRA contributions.  If you’re unsure of your eligibility, reach out to your Cobblestone Relationship Manager to confirm.
• Health Savings Accounts (HSAs) are available to individuals and families enrolled in High Deductible Health Plans.  If you are eligible to contribute, there are some powerful tax advantages to these accounts – deductible contributions, tax-deferred growth, and tax-free distribution for qualified medical expenses.
• The 2024 Contribution Limits for these accounts are $4,150 for individual coverage & $8,300 for family coverage.   For individuals over 55 (not 50!) there is a $1,000 catch-up contribution allowed as well.
• HSA funds are also able to be invested, so now is a good time to review your investment plan for any excess funds.

Employees aged 60-63 are now eligible to make increased catch-up contributions to their 401(k) plans.

• As part of the SECURE 2.0 Act legislation, there are new catch-up contribution provisions for 401(k) accounts (and similar plans) effective in 2025.
• This provision allows for an increased catch-up contribution amount of $11,250 (150% of the regular catch-up limit).  This allows eligible employees to defer a total of $34,750 for 2025 and applies only to participants who are 60, 61, 62, or 63 at year-end.
• Note that the regular $7,500 catch-up contribution is still available for employees who are 50-59 or older than 63.

Retirees turning 73 or older in 2025 are subject to Required Minimum Distributions on certain retirement accounts, including IRAs & 401(k)s

• Individuals aged 73 or older are required to distribute a specific amount from their IRA accounts, and 401(k) accounts if they are no longer working.
• Required Minimum Distributions do not apply to Roth IRA accounts, and as of 2024, no longer apply to Roth 401(k) or 403(b) accounts.
• If you are making regular charitable contributions, there is an option to make these gifts directly from your IRA as tax-free Qualified Charitable Distributions (QCDs).
• Be sure to review your distribution plan for the year to ensure that the distribution requirements are satisfied prior to year-end.

Make a plan for excess education funds – there is a new opportunity to roll 529 Funds to Roth IRAs

• If there are excess funds in your children’s 529 plans that are not needed for qualified education expenses, there is now an opportunity to roll some of the funds to a Roth IRA account to help jump-start their retirement savings.
• There are a handful of requirements that must be met for these transfers.  The 529 plan account must be open for at least 15 years and the contributions must have been in the account for at least 5 years.  The annual rollover amount is subject to earned income requirements and cannot exceed the Roth IRA contribution limit for the year ($7,000).  The lifetime maximum for these rollovers is $35,000.

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