New Cost-of-Living Adjustments for 2025
According to a recent report by the U.S. Bureau of Labor, consumer prices for goods and services rose higher in November than the annual pace over the last 12 months. While this isn’t great news for the cost of goods we purchase, there is some positive news when it comes to our income, savings and gifting opportunities.
The annual cost-of-living adjustments (COLA) are intended to help offset the impact of inflation each year so that Americans in retirement can keep pace with daily expenses. Ensure you’re prepared for the new year and take note of the adjustments summarized below as COLA changes can impact your retirement income, estate and gifting limits, retirement plans, and healthcare contributions.
Social Security
The Social Security cost-of-living adjustment for 2025 benefits is less significant than the past couple of years. Nevertheless, it will provide some much-needed relief to retirees who depend on their social security benefits. Workers are also seeing an increase in the Taxable Earning Threshold, which means that higher income workers will be making more tax payments to the Social Security Administration.
Social Security | 2024 | 2025 | Change |
Benefit Increase | 3.2% | 2.5% | -0.07% |
Taxable Earnings Threshold | $168,600 | $176,100 | $7,500 |
Estates and Gifting
Sometimes it feels better to give away your wealth now, rather than to wait until you pass away. If you are looking to do some gifting be mindful of the Annual Gift Exclusion Amount. If you go over it, you likely will not have a tax bill, but you will have to start offsetting your Lifetime Personal Exemption Amount, which is done by filing a gift tax return.
Estate and Gift Tax | 2024 | 2025 | Change |
Annual Gift Exclusion (per donor per beneficiary) | $18,000 | $19,000 | $1,000 |
Personal Exemption Amount (Single) | $13,610,0000 | $13,990,000 | $380,000 |
Personal Exemption Amount (Married) | $27,220,000 | $27,980,000 | $760,000 |
Employer Retirement Plans
If you are trying to maximize contributions to your 401(k), 403(b) or other employer-based retirement plans, be sure to bump up your per-pay-period contributions, especially if you are 50 or over!
Employer Retirement Plans | 2024 | 2025 | Change |
401(k), 403(b), and 457(b) plans | $23,000 | $23,500 | $500 |
Catch Up Limits (ages 50-59 & 64+) ** | $7,500 | $7,500 | -- |
Catch Up Limits (ages 60-63)* | N/A | $11,250 | -- |
SIMPLE IRAs | $16,000 | $16,500 | $500 |
Catch Up Limits (ages 50+) | N/A | $5,250 | -- |
Catch Up Limits (ages 60-63)* | -- | $5,520 | -- |
SEP-IRAs | $69,000 | $70,000 | $1,000 |
*A change that takes effect in 2025 under SECURE 2.0 for employees aged 60-63 who participate in 401(k), 403(b), and 457 (b) plans.
**Non-governmental 457(b) plans do not allow catch-up contributions for employees who are age 50-59 or 64+.
Individual Retirement Plans
Take notice of the 2024 limits as well. If you have not yet funded your IRA for the 2024 tax year, and are eligible to do so, then you can contribute up until you file your taxes.
Individual Retirement Plans | 2024 | 2025 | Change |
Traditional and Roth IRAs | $7,000 | $7,000 | -- |
Catch Up Limits (ages 50+) | $1,000 | $1,000 | -- |
Health Care
Do you have a high deductible health plan? If so, you may be eligible to contribute to a Health Savings Account (HSA). These tax-advantaged accounts grow tax-deferred like retirement savings vehicles and come with the added benefit of tax-free distributions for qualifying medical expenses. Like IRA contributions, you can fund your 2024 contributions up until filing your taxes.
Health Savings | 2024 | 2025 | Change |
HSA Limits (Single Coverage) | $4,150 | $4,300 | $150 |
HSA Limits (Family Coverage) | $8,300 | $8,550 | $250 |
Catch Up Limits (ages 55+) | $1,000 | $1,000 | -- |
For additional information on the changes mentioned above, be sure to check out these additional resources:
Employer Plan Changes and IRA information
The information provided herein is for educational purposes only, and should not be construed as advice, including, but not limited to tax, legal, insurance, investment, or retirement advice. For your specific planning needs, please seek the advice of Integris Wealth Management, your tax accountant, attorney, insurance agent, or other professional as appropriate. Investing involves the risk of loss.
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