New Year, New Contributions: What to Know About Maximizing Your Retirement Savings in 2025
As we ring in the new year, it’s the perfect time to evaluate your retirement savings strategy. Whether you’re just getting started or are well on your way to building a substantial nest egg, reviewing your contribution plans now can help you make the most of your financial future.
As a financial advisor and CERTIFIED FINANCIAL PLANNER™ professional, I often guide clients through the steps to optimize their retirement savings. Starting the year with a clear plan can set the tone for long-term success.
2025 Contribution Limits for 401(k)s and IRAs
Staying informed about annual contribution limits is key to optimizing your retirement savings. For 2025, here are the limits you need to know:
401(k) Plans:
Contribution limit: $23,500
Catch-up contribution (for individuals aged 50 and older): An additional $7,500, bringing the total to $31,000.
Individual Retirement Accounts (IRAs):
Contribution limit: $7,500
Catch-up contribution (for individuals aged 50 and older): An additional $1,000, bringing the total to $8,500.
These limits present a valuable opportunity to increase your contributions, especially if you didn’t maximize them in previous years.
Create Your 2025 Retirement Savings Action Plan
Every individual’s financial situation is unique, which is why creating a personalized action plan is so important. Here are some actionable steps to consider as you refine your retirement savings strategy:
Automate Your Contributions:
Action Item: Set up or adjust automatic transfers from your paycheck to your 401(k) or from your bank account to your IRA. Review your current contribution amounts and increase them if possible.
Why It Matters: Automation ensures you stay consistent and removes the temptation to delay contributions.
Take Advantage of Employer Matches:
Action Item: Review your employer’s matching policy and confirm you’re contributing enough to receive the full match.
Why It Matters: Employer matching is free money that can significantly accelerate your retirement savings.
Catch-Up Contributions:
Action Item: If you’re 50 or older, calculate how much extra you can contribute and update your plan to include these catch-up contributions.
Why It Matters: These additional contributions can make a big impact in the years leading up to retirement.
Maximize Roth IRA Contributions:
Action Item: If your income allows, contribute to a Roth IRA. If you exceed the income limits, talk to your financial advisor about a backdoor Roth IRA strategy.
Why It Matters: Roth IRAs provide tax-free growth and withdrawals, which can be a valuable part of your retirement portfolio.
Increase Contributions Gradually:
Action Item: Plan to increase your contribution rate by 1-2% this year. Mark your calendar for mid-year to reassess and increase again if possible.
Why It Matters: Small, incremental increases can have a significant impact over time without feeling overwhelming.
Review and Rebalance Your Portfolio:
Action Item: Schedule a portfolio review to ensure your investment allocations align with your risk tolerance and retirement timeline.
Why It Matters: Rebalancing ensures you’re on track and mitigates risks as your goals evolve.
Work with a Financial Advisor
While these steps are a great starting point, every individual’s situation is unique. A personalized approach is essential to ensure you’re maximizing your opportunities and aligning your savings strategy with your goals.
As a financial advisor and CFP™ professional, I can help you navigate these decisions and create a tailored plan that works for you. If you don’t have a financial advisor or would like a second opinion on your retirement savings strategy, I’d be happy to talk to you to help you start 2025 with a renewed focus in feeling confident about your financial future.
Please Note: This information was provided in part by ChatGPT. This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to herein. Investments mentioned may not be suitable for all investors. The material is general in nature. Past performance may not be indicative of future results. Raymond James does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional. Any opinions are those of Lauren Smith and not necessarily those of Raymond James.