The IRS has announced the contribution limits for 401(k)s and IRAs for 2025, but there's an additional factor this year for those who qualify and want to save more for retirement. The limits are detailed in Notice 2024-80 (tinyurl.com/3rsjw48u).

Defined Contribution Plans: Based on a cost-of-living annual adjustment, the maximum amount someone can contribute in 2025 to a 401(k) or other company retirement plan (403(b), 457 plan and the federal government's Thrift Savings Plan) will be $23,500, an increase of $500 from 2024's limit.

Catch-up: Someone age 50 or older can contribute an additional $7,500 (the same limit as in 2024), bringing the 2025 maximum to $31,000.

Special Age 60-63 Catch-up: New for 2025 is a special catch-up for participants between the ages of 60 and 63 under a provision of the SECURE 2.0 Act of 2022 that takes effect in 2025. (Please note: Not all plans have the catch-up feature.) For those who are eligible, their catch-up contribution will be $11,250 instead of $7,500, making the contribution limit $34,750 instead of $31,000.

Overall Limit: When you add employer contributions, the limit in 2025 is $70,000, up from $69,000 in 2024. This limit captures both employee and employer contributions (but not catch-up contributions).

A reminder of a SECURE 2.0 Act provision that is NOT yet fully in effect is the one requiring that catch-up contributions for higher earners (more than $145,000 in the previous year) be designated as post-tax Roth contributions, not as pre-tax contributions. IRS Notice 2023-62 (tinyurl.com/39jjufm7), released in August of 2023, indicated there would be "an administrative transition period" of two years after Dec. 31, 2023, in relation to the requirement.

IRAs: As for IRAs, the limit on contributions remains the same for 2025: $7,000. The catch-up contribution for those who are 50 and older is also unchanged at $1,000 for 2025, bringing the total to $8,000.

Tax-deductible IRAs: Deductible contributions to traditional IRAs are based on MAGI (modified adjusted gross income). Briefly, to take a tax deduction, the MAGI must be below a certain amount. Different limits apply if the taxpayer or his or her spouse participates in a 401(k). For example, a single person's MAGI is $89,000 if the taxpayer is a 401(k) participant; there is no MAGI limit if the taxpayer (or his or her spouse) does not participate in a company retirement plan.

Roth IRA Contributions: In order to be eligible to contribute to a Roth IRA, MAGI must be below $165,000 (single and head of household) and $246,000 (for married couples filing jointly).

If you are wondering how many people have traditional or Roth IRAs, research released in 2024 by the Investment Company Institute reported that as of year-end 2023, more than 24% of U.S. households had a Roth IRA (31.9 million households). In contrast, 31% had a traditional pre-tax IRA (41.1 million), and overall, 42% of households (55.5 million) had some type of IRA (tinyurl.com/4v3j56zr). The combined IRA assets total $13.6 trillion.

Saver's Credit: The IRS also announced limits for the Saver's Credit (aka the Retirement Savings Contributions Credit), a retirement savings tax credit that is available for lower- and middle-income taxpayers.

The income limit for 2025 is $79,000 for married couples filing jointly, which is an increase from $76,500 in 2024; $59,250 for heads of household, up from $57,375; and $39,500 for single and married individuals filing separately, up from $38,250.

You can find more information on the IRS webpage featuring the Saver's Credit: tinyurl.com/4euvfj8e.

Finally, if you are interested in making a qualified charitable distribution (QCD), the limit in 2025 will be $108,000, up from $105,000 in 2024. Keep in mind that you must be over age 70 1/2 to make a QCD. If you would like to read more about QCDs, email me (readers@juliejason.com).

With the guidelines for 2025 now revealed, you will want to consult with your tax adviser on how these limits relate to your financial plans, as each person's tax situation is unique.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Do couples know that wives will likely outlive their husbands? As reported in a National Bureau of Economic Research Paper (tinyurl.com/6yfx4ep3), widows are expected to outlive their husbands by more than a decade (12.5 years).

Knowing this, should couples talk about the future? Should they prepare for financial, tax and legal questions that need to be understood by the survivor?

In my practice, the future is a natural part of open discussions, usually including tax and legal considerations. But outside of my practice, I see couples who need to talk but don't. That's frustrating for me personally, since just being aware of things that can go wrong would help avoid mistakes.

This is not a gender issue, but it can turn out to be so. It has to do with who makes the financial decisions in the household. Who does the taxes? Who invests? Who has the relationships with the accountant, the estate planning lawyer, the financial professionals and, in the case of the high-net-worth, the family's money managers?

If the survivor is not the decision-maker, he or she will likely be lost in a sea of uncertainty when it comes to finances and taxes.

Accountant Jackie Spagnolo, managing director of Andersen Tax of Stamford, Connecticut, recounted a story about a client in her 50s whose husband died unexpectedly. Her husband had a strong connection with the couple's accountant, but once the husband passed away, the new widow felt alienated. She and the accountant didn't connect properly. The widow felt her voice wasn't being heard. She wasn't comfortable asking questions. In fact, she actually felt as if she was being kept in the dark.

That's a good example of a problem that can be avoided with some planning by both husband and wife. The answer is for both spouses to be comfortable with the family's financial, tax and legal advisers.

But what about someone who has no interest in getting to know advisers, or in investing or finances? This question came up in a joint presentation that I gave with Spagnolo last week to a small group of women. (If you would like to be invited to future presentations, let me know at readers@juliejason.com.)

For example, what about a conversation with the family's tax preparer? It may be difficult for someone with no experience to ask questions.

Spagnolo offers this advice: "Don't be intimidated to ask questions. Tax concepts can be complicated, so be sure you understand what your accountant is proposing during any planning or consulting calls. No question is too small."

If that sounds difficult, you can get help in advance of a dialogue with the tax preparer. I asked Spagnolo if someone could retain her to review a tax return that has already been filed, and yes, indeed, that is possible. By doing that, you can ask anything that comes to mind. Problem solved. Be sure to find someone with whom you can easily communicate.

Spagnolo added that planning for the future is equally important: "Ask your accountant for a summary of planning ideas that you can take home with you after a meeting to digest what was discussed and come up with follow-up questions you may have."

Spagnolo also recommends meeting with your accountant at least quarterly. "Communication is important. It helps establish goals, discuss objectives or even manage cash-flow expectations. It also builds the relationship between you and your accountant. Your accountant will be very much involved in your financial situation. Tax blends through to family relationships, and having more open communications can help your accountant fully understand your objectives and what's important to you," explained Spagnolo.

The same holds true for lawyers and financial advisers.

Over the years, I've seen families sidestep the big issues that future widows will face even when the couple is aware of a life-threatening illness. It's just a hard conversation to have. Who wants to face mortality -- or the potential loss of a spouse to divorce or incapacity? Just imagine how much more difficult it will be after the fact if not prepared.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Given that I'm always thinking about retirement investing for people of all ages, I'm always eager to share tools and resources that can be helpful if you are retired or hoping to retire securely someday in the future.

A key to retirement success is prudent decision-making, which, without exception, flows from a solid base of knowledge and experience. When test-takers on retirement financial literacy score low, that's a sign of more work to be done.

When we've talked about this subject in the past, I've mentioned a particular test conducted by the American College of Financial Services called the Retirement Income Financial Literacy Quiz. As reported in the 2023 Retirement Income Literacy Study, the quiz was administered to 3,765 Americans ages 50 to 74. The findings? Scores were scary low: The average retirement income literacy score was 31% -- well below a passing grade.

I encourage you to take 15 minutes to take the quiz to test your own knowledge. Go to: tinyurl.com/yeyrk3yj.

The test covers several important retirement categories, including retirement income, Social Security, annuities, life insurance, long-term care, Medicare and taxes.

To pique your interest, I'll give you some sample questions here. To further encourage you, you'll find the answers on the website only after you take the test. There are 38 questions overall. Taking the test will help you "assess your retirement planning knowledge and begin the journey towards retirement readiness." Here we go:

-- Choose the response below that best completes this statement: If you had a well-diversified portfolio of 50% stocks and 50% bonds that was worth $100,000 at retirement, based on historical returns in the United States, the most you can afford to withdraw each year is about (answer) plus inflation each year to have a 95% chance that your assets will last for 30 years: A) $2,000; B) $4,000; C) $6,000; or D) $8,000.

-- Choose the response below that best completes this statement: To maximize the safe withdrawal rate from a portfolio over a 30-year retirement period, it is best to hold (answer) in equities throughout retirement: A) 0-10%; B) 25-35%; C) 50-60%; D) 90-100%.

-- Which one of the following is true about cash value life insurance? A) The cash value portion will accumulate tax deferred; B) You typically cannot borrow from the cash value; C) The policy will expire after a specified period of time; D) The policy will typically cost less than a term insurance policy.

-- Nationally, who pays for the majority of long-term care expenses provided in nursing homes? A) Medicare; B) Private payment by individuals; C) Medicaid; D) Insurance purchased by individuals.

-- A deferred variable annuity with guaranteed lifetime withdrawal benefits (answer): A) Ensures that the investment account will not lose value; B) Only offers investment alternatives with fixed returns; C) Pays guaranteed income that varies based on market performance; D) Can pay income even if the investment account goes to zero.

Other topics include the age that required distributions need to be made from an IRA; when a reverse mortgage with a lump sum payment needs to be repaid; what medical expenses are covered by traditional Medicare; what is a PE ratio; and claiming Social Security benefits.

Taking this survey can give you an idea of areas where your knowledge needs to be increased. The more you understand, the more you can prepare for retirement.

You'll find the correct answers at the end of the quiz (wish I could give them to you here ...) Your results can help you decide what topics might require professional assistance. The ultimate goal is not your score on the quiz -- it's what you learn from it today that can help you with tomorrow's decisions.

And a final note: If you are interested in attending one of my virtual or in-person presentations, email me to be placed on an invitation list. Some presentations are also listed on my website (www.juliejason.com).

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION