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If you know you need to make some changes in order to increase retirement savings in 2025, then keep reading.

We’ve compiled 9 potential changes you can make to your saving, spending, and investing habits that may increase retirement savings in 2025.

Read on to learn more.

 

The State of Retirement Savings

According to the Northwestern Mutual 2024 Planning & Progress Study, “The ‘Silver Tsunami’ is here: 11,000 Americans will turn 65 every day through 2027; only half of Boomers+ and Gen X believe they’ll be financially ready for retirement.”¹

Unfortunately, many who are part of the “Silver Tsunami” are not ready for retirement.

A separate 2024 survey by Prudential found there will be an increase in “Silver Squatters” or older Americans who will need “to rely more on family for housing, financial support.”²

This is because they have not saved enough for retirement.

According to Prudential, “Nearly a quarter (24%) of 55-year-olds expect to need financial support from family in retirement – twice as many as 65- and 75-year-olds (12%). One in five (21%) also expects to need housing support, compared to 12% of 65-year-olds and 9% of 75-year-olds.”³

So, it’s no surprise that many Americans seek ways to increase retirement savings.

 

Reconsider Target Date Funds

Vanguard’s How America Saves 2024 Report found that “Eighty-three percent of all participants used target-date funds, and 70% of target-date investors had their entire account invested in a single target-date fund.”⁴

This is likely because employers automatically enroll employees in target date funds by default. 

Target date funds are based on an investor’s expected retirement date, but other important factors, such as location, profession, salary, risk tolerance, goals, and objectives, are not always considered. 

While target date funds offer a simple, hands-off approach to investing and are often selected as a default option for their convenience, they may not align with everyone’s individual needs.

Those hoping to increase retirement savings in 2025 might benefit from evaluating whether the default option is the best fit for their situation. 

 

Rebalance Your Account

Rebalancing your 401(k) can be beneficial because your risk tolerance may change over time.

The stock or mutual fund you originally selected may no longer align with your financial goals or market conditions.

Rebalancing involves periodically buying or selling assets in your portfolio to maintain your desired level of asset allocation. 

However, the appropriate frequency for rebalancing varies depending on individual circumstances, such as your financial strategy, goals, and market conditions.

Those who do not rebalance their allocations periodically may miss opportunities to better align their portfolio with their objectives. 

Consider adding rebalancing to your financial planning routine for 2025, and consult a financial advisor to determine the right approach for your situation.

Check out this video to learn more about rebalancing. 

 

Reassess Your Risk Tolerance

Having accessible funds can provide safety and security during market dips or unforeseen financial challenges. 

While cash savings are an important component of a financial plan, keep in mind that most money market accounts pay little to no interest, which may limit potential growth opportunities.

Your risk tolerance is unique and may change over time due to life events, financial goals, or market conditions. 

Reassessing your risk tolerance periodically can help ensure your financial strategy aligns with your current situation.

Consider consulting a financial advisor when reassessing your risk tolerance to ensure your investment decisions reflect your long-term goals and personal circumstances.

 

Contribute the Maximum if Possible

Try to contribute as much as possible to your 401(k) – this means contributing up to the limit.

The 401(k) contribution limit has increased to $23,500 in 2025, up from $23,000 in 2024.

For workers 50 and above, the catch-up contribution limit remains at $7,500, allowing for a total contribution limit of $31,000. 

Individuals aged 60 to 63 may contribute an additional $11,250 instead of the $7,500 catch-up contribution for other age groups, bringing their total contribution limit to $34,750.

While contributing the maximum may not be feasible for everyone, aim to contribute enough to take full advantage of your employer’s matching contributions – if offered. 

 

Earn Free Money via the Company Match

No one willingly turns down free money. But that’s what happens when you don’t contribute enough to get the company match.

For example, if your company matches 100% up to 6% of your pay, and you make $40,000 a year, you could put in $2,400 (or 6%) for the year, and your company would match this 100%.

This means you have earned $2,400 free money toward your retirement!

[Related Read: 4 Ways to Potentially Maximize Your 401(k) Company Match]

 

Save Extra Money

We live in a time when it is common to “treat yourself.”

Now, this is different from “paying yourself first.”

Paying yourself first refers to taking care of yourself by saving for your retirement before paying for other things.

Treating yourself refers to treating yourself today, in the present.

Stop spending so much in the present and start saving more for your future. 

When you get a bonus, don’t spend it. Save it.

When you get a raise, don’t increase your lifestyle. Save the extra for a more comfortable retirement lifestyle.

Your future self will thank you.

 

Boost Your Income

If you are behind and want to increase retirement savings, look for opportunities to boost your income.

Consider taking on a second job or side hustle. Look for investment opportunities, such as rental units. 

 

Get Engaged with Your Investments

Even though investments help grow money for the future, many people aren’t engaged with their investments. 

Here are some ways that may help you get engaged – and stay engaged – with your investments:

• Learn how to read your 401(k) statement. To know where you stand financially, you need to read your 401(k) statement. See a breakdown of statement images, graphs, and explanations in How to Read a 401(k) Statement and Understand It to gain a better understanding. 

• Read blogs. Continue reading this blog and subscribe to YouTube videos or podcasts that strengthen your understanding.
• Ask questions. If there is something you don’t know or don’t understand about your 401(k) investments, ask! Check out this article: 5 Questions to Ask a 401(k) Plan Provider Sooner Rather Than Later.

 

Ask for Help

The best chance to increase retirement savings is by asking for help.

There is no shame in admitting you don’t have all the answers and don’t know how to save enough to retire comfortably.

401(k) Maneuver exists to help employees grow and protect their 401(k) accounts. We provide independent, personalized professional account management to help employees, just like you, grow and protect their 401(k) accounts.

And we do this without in-person meetings, so you don’t have to drive to an appointment or spend hours preparing for the meeting.

Our done-for-you virtual service allows you to keep your 401(k) right where it is while we review and rebalance your account based on your risk tolerance and current market conditions. 

All you need to do is connect your account to our secure platform, and we manage your account for you. There’s no need to move your account – you can keep it right where it is. 

 

Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

Sources

1. https://news.northwesternmutual.com/2024-04-02-Americans-Believe-They-Will-Need-1-46-Million-to-Retire-Comfortably-According-to-Northwestern-Mutual-2024-Planning-Progress-Study
2. https://news.prudential.com/latest-news/prudential-news/prudential-news-details/2024/2024-Pulse-of-the-American-Retiree-Survey/default.aspx
3. https://news.prudential.com/latest-news/prudential-news/prudential-news-details/2024/2024-Pulse-of-the-American-Retiree-Survey/default.aspx
4. https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2024/has/how_america_saves_report_2024.pdf

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As we wrap up 2024, it’s time to focus on personal finance tips for 2025.

Make getting your financial house in order your main 2025 resolution.

Not only is it possible, but it is also something many of us need to do.

A 2024 Bankrate study found, “Whereas 72% of Americans indicated they were not completely financially secure in 2023, that number has now risen to 75% in 2024. Three in 10 (30%) Americans say they are not completely financially secure and likely never will be, up from 26% in 2023.”¹

Financial security is important – but it is up to you to get there. 

Here are 12 personal finance tips for 2025 to help you take actionable steps toward improving your financial situation.

 

#1 Get Engaged with Your Finances

Mark Hamrick, a Senior Economic Analyst at Bankrate, explains, “Many Americans are stuck somewhere between continued sticker shock from elevated prices, a lack of income gains and a feeling that their hopes and dreams are out of touch with their financial capabilities.”²

If you feel this way, it can be tempting to bury your head in the sand and give up.

That’s not the answer. 

If you want to improve your financial situation, get engaged with your finances. 

Take a good, hard look at where you stand financially.

Review your debts. Review your savings accounts.

You need to be honest about where you are currently so you can get yourself to a more financially secure future. 

 

#2 Set Achievable Goals

We love to set New Year’s resolutions, but we often fail to keep them. 

Instead of setting an unattainable resolution, set achievable goals for yourself.

Ask yourself the following questions:

• How much debt do you have? How much time will it take you to pay it off realistically?
• How much more do you need to contribute to your 401(k) each paycheck to put yourself in a better position come retirement?
• Do you have any money saved for emergencies?

Consider your answers. 

You may not be able to pay off all your debt and save more for retirement in 2025.

But could you set a more realistic goal, such as paying off 80% of your debt by the end of 2025, boosting contributions by 1%, or building an emergency fund of $5,000?

Setting smaller, more achievable goals may motivate you better than setting big dream goals.

 

#3 Get a Plan for Retirement

How can you save for a goal of retiring and traveling the world, if you don’t have a plan to get there? 

It’s pretty difficult.

If you don’t have a retirement plan, create one based on your individual needs and wants.

Ask yourself the following questions:

• At what age do you want to retire? 
• What do you want your retirement to be like? Where do you want to live?
• How much money will you need to have a financially secure retirement? 

Answering these questions helps get a plan in place. 

Use our 401(k) Calculator to see how much you may have at retirement with professional account management.

 

#4 Create a Budget

Once you know where you stand currently and have set financial goals, it’s time to create a budget.

Creating a budget is one of the best personal finance tips for 2025.

Keeping your current financial situation and goals in mind, draw up a budget that covers every budget item – including paying down debt, building up savings, and discretionary spending.

If you need help, there are numerous apps to help you budget and prevent you from overspending. 

 

#5 Pay Yourself First

One effective way to stay on track with your budget is to prioritize saving for your future by paying yourself first. 

Consider setting up automatic contributions to your 401(k) or IRA, if eligible, to have a portion of your paycheck deposited directly into these accounts. 

Additionally, transferring money to your savings account before paying other expenses can help you build financial security over time.

 

#6 Build an Emergency Fund

Life happens, which is why you need an emergency fund.

If you don’t have an emergency fund, chances are you may have to put charges on your credit card.

Consider setting up a dedicated savings account just for emergencies.

Get a quick start on your emergency fund by depositing your tax refund into your emergency savings account.

 

#7 Boost 401(k) Contributions

How much are you currently contributing to your 401(k)? 

Will 2025 be the year when you contribute more?

Try to do whatever is possible to increase contributions – especially contribute enough to make the company match.

Note – Individuals aged 60 to 63 may contribute an additional $11,250 in 2025 instead of the $7,500 catch-up contribution those 50 to 59 and 64 and older may contribute. This means those in this group can potentially contribute up to $34,750 in total to their 401(k) plan.

[Related Read: 2025’s Super Catch-Up 401(k) Contribution]

 

#8 Regularly Rebalance Your 401(k)

We recommend rebalancing 401(k) account allocations throughout the year. 

Unmanaged allocations may experience larger losses because of down markets. In contrast, they may miss growth opportunities during good markets.

Instead of allowing these things to happen, rebalance regularly to earn more and retain more of your savings.

You can rebalance yourself or work with 401(k) Maneuver.

We offer professional quarterly 401(k) account rebalancing that is personalized to your tolerance to risk and based on current economic and market conditions.

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance.

See how it works.  

 

#9 Improve Your Credit

Whether you are worried about your credit score or the increase in identity theft issues, you should get a copy of your credit report.

Ensure all the information is correct and report potential identity theft issues.

Call 1.877.322.8228 or visit www.annualcreditreport.com to obtain a free credit report from the three major credit reporting agencies.

Look over your credit report and see if you notice anything suspicious.

For those with a lower credit score, use 2025 to pay bills on time and boost your credit score.

 

#10 Review Insurance Policies

Take a few minutes of time in 2025 to review your insurance policies.

Don’t simply renew your insurance year after year.

You could potentially be missing out on savings based on changes you’ve made or changes with the insurance company.

Plus, you may be able to find better rates through a different company.

 

#11 Commit to Knowledge

One of the most effective personal finance tips for 2025 is committing to knowledge.

Knowledge is power. 

Learn all that you can about finances and retirement savings. 

As you grow knowledgeable, you will grow more secure and confident about making financial decisions for your future.

Check out our complimentary 401(k) investing guide. Read blogs like this one. Watch videos. Listen to podcasts. 

 

#12 Work with a Financial Advisor

A financial advisor may help you get on track to meet your goals and help you feel more financially secure. 

[Try our 401(k) Calculator to see how professional management help may impact your 401(k) balance in retirement.] 

401(k) Maneuver provides professional account management with the goal of helping you grow and protect your 401(k).

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that harm your account performance. 

 

Have questions about how 401(k) Maneuver works? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

Sources

1. https://www.bankrate.com/banking/financial-freedom-survey/
2. https://www.bankrate.com/banking/financial-freedom-survey/

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America, it may be time to hit pause on spending. Even if just for a little while. 

The statistics from Clever speak volumes:

• Nearly three-quarters of Americans (71%) have regrets about their spending, and a majority of Americans (55%) say they spend recklessly.
• 78% of Americans make purchases they immediately regret.
• 38% of Americans say they often know their purchases are reckless but make them anyway.
• 1 in 6 Americans (16%) say their spending has ruined their life.
• 84% of Americans justify unnecessary purchases with phrases such as “I deserve it” or “I’ll treat myself.” 
• Nearly one-third of Americans (29%) engage in “doom spending,” which is overspending to cope with stress.¹ 

It’s no secret that our spending habits can spiral out of control, often justified with phrases like, “I deserve it,” or “This is just a one-time purchase.” 

Enter the spending break: A chance to pause, reevaluate, and reclaim control over your finances. 

Whether it’s a No Spend Challenge or a personal commitment to curb unnecessary purchases, this practice isn’t just about saving money – it’s about redefining how we spend and live.

Keep reading to learn why a spending break could be the financial reset you need and how to make it a success.

Benefits of a Spending Break

The idea of a spending break is to only spend money on necessities for a set amount of days, such as a month.

During a spending break, you only pay for the things you need: Hosing, utilities, gas, and groceries. 

The goal is to eliminate unnecessary spending and put the money saved during this time period into your savings.

There are benefits to taking a spending break.

For instance, Kendall Meade, a financial planner at SoFi, says, “When they are going through these no-spend times, people realize what they were spending money on wasn’t that important to them. […] It can help them figure out what they can cut out moving forward.”²

Here are some reasons why so many people are taking on the No Spend Challenge. 

• Save Money. If you are NOT spending money, you are saving money. Take a look at your bank account at the end of your spending fast. The excess you have (compared to your usual spending months) should go straight into savings.

• Identify Needs versus Wants. We are used to being able to buy things when we want them just because it is so easy now with card payments, Apple Watch pay, and online shopping. This is a problem because it makes it easier to buy things we want but really don’t need. If you are forced to question whether what you are buying is a want or a need, it will shift your way of thinking about shopping.

• Examine Lifestyle Creep. Lifestyle creep is a real thing. We tend to reward ourselves as we advance in our careers by elevating our lifestyle. We upgrade our homes, cars, and even our groceries. When you turn off spending, it will be more evident about what things you’ve been accustomed to buying now that you are in a different life season. This should also make you consider how much more you could have saved for retirement if you kept your lifestyle the same as your income rose.
  
  [Related Read: Are These 5 Bad Financial Habits Sabotaging Your Retirement Savings?]

• Avoid Emotional Impulse Buys. As the statistics show, impulse shopping is a big issue for many people. We fall victim to the Dollar Section at Target or the items at the checkout lane. But, if you are on a spending break, you‘ll find it easier to resist this temptation.

Less Stuff. American homes are packed full of stuff. I know people who have so much stuff that they often forget about the stuff they already own and go out and buy the same stuff they already own. A little spending break can do wonders for the state of your closet and junk drawers.

Tips for a Successful Spending Break

Now that you understand the benefits of participating in a spending break, let’s talk about how to succeed when you hit pause. 

• Set a Reasonable Time Frame. Generally, you’ll hear people talk about a No Spending Month. While this is a reasonable amount of time, it isn’t a set rule. You can set up whatever time frame works best for you. You may need to start small with a No Spend Weekend and then gradually move up to a No Spend Week.

• Use Cash. We live in a time when we rarely ever need to use cash, but cash is more tangible than a credit card. Once the cash is gone, it’s gone. For the time of your spending break, use cash rather than cards.

• Remove Temptations. If you know you will be tempted by emails announcing sales, notifications alerting you to discounts, or Instagram accounts hacking new products, turn them off for the spending break.

• Borrow Before You Buy. Make it a goal to borrow before you buy. When you are tempted to buy something new – even something you are convinced you “need” (like a new dress for an event) – ask around and see if someone has one you can borrow. This not only prevents you from spending money during this time period, but it also allows you to see if you truly need it.

• Talk to Friends and Family about What You’re Doing. Be honest with friends and family about your spending break. They may even want to participate alongside you.

• Plan Ahead for Spending Occasions. It’s important to consider what is happening during this time period. For example, if you know your best friend’s birthday falls during your spending break, go ahead and plan around it. You don’t want to miss out on planned events and special occasions because of this challenge.

Don’t Get Discouraged When You Slip Up. If you do wind up buying something that is not considered a necessity during this spending break, don’t beat yourself up. Give yourself grace and start fresh the next day.

Better Prepare for a Life of Abundance in Retirement.
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SOURCES

1. https://listwithclever.com/research/bad-spending-habits-2024/
2. https://www.cnbc.com/select/no-spend-challenge/

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The 2025 retirement savings rules may provide new opportunities for individuals to save more in their 401(k) plans. 

This is due to the passing of SECURE Act 2.0 which passed in 2022, which many provisions set to take effect in 2025.

Some of the new provisions may require employer implementation – and employers have discretion over whether to adopt certain options. 

This means you may need to inquire about your employer’s plans to ensure you can take full advantage of these changes.

Read on to learn more about the 2025 retirement savings rules.

Increased Catch-Up Contributions

The IRS announced an increase to 401(k) plan contribution limits for the upcoming year.

The 401(k) contribution limit has increased to $23,500 in 2025, up from $23,000 in 2024.

For workers 50 and above, there is no increase in catch-up contribution limits. 

The catch-up contribution limit for those 50 years and older remains $7,500 for a total contribution limit of $31,000.

Super Catch-Up 401(k) Contributions

The SECURE 2.0 introduced a new provision for individuals aged 60 to 63, allowing them to make higher catch-up contributions starting in 2025.

For this age group, the catch-up contribution limit increases to $11,250. 

As a result, eligible individuals aged 60 to 63 may contribute up to $34,750 in total to their 401(k) plan in 2025.

Automatic Enrollment in Workplace Retirement Plans

The 2025 retirement savings rules also include requiring employers to automatically enroll new employees at a savings rate between 3% and 10% of their salary.

In addition to the automatic enrollment, the contribution rate will now automatically increase by 1% each year until it reaches at least 10%.

The contribution rate will be capped at 15%.

Note – Employees retain the option to opt out of automatic enrollment.

Additional Allocations for Employer Matching Contributions

A 2024 provision of the Secure Act 2.0 relates to student loans and retirement. 

This provision of the Secure 2.0 Act allows employees to pay off student loans while saving for retirement through matching employer contributions. 

It went into effect on January 1, 2024, but many are still unaware of how it works.

In addition to this 2024 provision, the 2025 retirement savings rules pave the way for employer matching contributions to go to savings other than 401(k) plans.

According to reports, “The IRS has allowed workers at one company to use 401(k) matching contributions to pay for medical and student loan expenses, indicating the possibility that others might someday be able to do the same. The agency in an August ruling determined that a company, which it didn’t name, could allow its workers to allocate matching contribution to their 401(k), retiree health reimbursement arrangement (HRA), health savings account (HSA), or an educational assistance program used to pay off student loans.”¹

You can potentially have your employer match go towards student loans, a HAS (Health Savings Account), or an HRA (Health Reimbursement Arrangements) instead of your 401(k).

In about 5 years, this will be standard, but it is very new, and employers must request this ability from the IRS and then fill out the required paperwork.

If you are interested in this option, it is something you may want to discuss with your employer. 

Even if your employer doesn’t offer this option in 2025, you can go ahead and get the ball rolling. 

Lost 401(k) Plan Search Tool

Americans change jobs – often.

As a result, many Americans have several different 401(k) accounts.

According to reports, “There are some 24 million forgotten 401(k)s holding assets in excess of $1.3 trillion.”²

Generally, when 401(k) accounts sit too long, the accounts may eventually be deemed unclaimed property by the state.

[Related Read: The Danger of Forgetting to Roll Over Old 401(k)s]

You do not want to lose your hard-earned retirement savings!

We’re going to assume that was not your plan, but you may have mistakenly believed the 401(k) was rolled over when you changed jobs when it wasn’t.

It is up to you to keep track of your 401(k) savings.

But it has been hard to keep up with old 401(k) accounts – especially if you have changed jobs multiple times.

It’s about to get much easier!

The 2025 retirement savings rules include the Department of Labor adding a new search tool specifically for helping individuals locate lost 401(k) plans from former employers. 

This searchable database will make it easier to find old retirement accounts before they become property of the state.

Even if you don’t think you have any money unaccounted for, it’s still wise to take advantage of the new 401(k) plan search tool.

How to Maximize Retirement Savings in 2025

The 2025 retirement savings rules introduce several opportunities for Americans to enhance their retirement savings. 

Here are some strategies to consider:

• Take advantage of the increased catch-up contributions. Find ways to boost your contributions. Put any bonuses or Christmas gift money towards boosting contributions.
• Raise the percentage you are contributing. Every little bit adds up to more savings in the future.
• Carefully consider how you want to allocate your employer’s matching contributions. The goal should be to contribute as much as possible to your 401(k), but in some situations, such as contributing to a HAS, it may be a wise choice. 
• Use the lost 401(k) plan search tool just in case. It may prove to be well worth the little bit of time it takes.
• Speak to a financial advisor. You want to make sure you are following the rules and using them to your advantage. 

Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) strategy session with one of our advisors.

Book a Strategy Session

Sources

1. https://www.investopedia.com/irs-ruling-could-open-up-401k-matches-student-loans-medical-payments-update-8738211
2. https://www.schwab.com/learn/story/tracking-down-lost-401k

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If you’re between the ages of 60 and 63, 2025 marks a golden opportunity to supercharge your retirement savings. 

Thanks to the SECURE 2.0 Act, the IRS is rolling out a special “super catch-up” 401(k) contribution limit, allowing eligible individuals to save significantly more than ever before.

This new contribution limit is designed to give those nearing retirement an extra boost. 

Whether you’ve been consistently saving or need to make up for lost time, this enhanced contribution option could be the key to a more secure retirement.

Keep reading to learn how much you can contribute, why this change matters, and who should take full advantage of this opportunity.

401(k) Contribution Limits for 2025

The IRS announced an increase to 401(k) plan contribution limits for the upcoming year.

The 401(k) contribution limit has increased to $23,500 in 2025, up from $23,000 in 2024.

For workers 50 and above, there is no increase in catch-up contribution limits. It remains $7,500 in 2025 for a total contribution limit of $31,000.

However, there is a group of people who can take advantage of the 2025 super catch-up 401(k) contribution limit.

How Much Is the Super Catch-Up 401(k) Contribution?

The super catch-up 401(k) contribution limit is specifically for those aged 60-63 starting in 2025.

Those lucky individuals aged 60 to 63 may contribute an additional $11,250 instead of the $7,500 catch-up contribution those 50-59 and 64 and older may contribute. 

Those in this age group can contribute an additional $3,750 to their 401(k) plans.

This means that rather than having a contribution limit of $23,500, those in this group can potentially contribute up to $34,750 in total to their 401(k) plan.

The super catch-up 401(k) contribution limit is a fantastic opportunity to boost retirement savings.

Why Is Super Catch-Up 401(k) Contribution So Important?

The cost of retirement continues to rise.

According to the Northwestern Mutual 2024 Planning & Progress Study, “American adults say on average they now need $1.46 million to retire. That’s 15% higher than a year earlier and a 50% increase since 2020.”¹

Despite this, many Americans are not saving enough to retire comfortably.

The 2023 Protected Retirement Income and Planning (PRIP) study from the Alliance for Lifetime Income found: 

• 51% of consumers between 45 and 75 feel they do not have enough retirement savings to last their lifetime.
• 32% are not confident they will have enough money in retirement to cover basic monthly expenses.²

The super catch-up 401(k) contribution limit for those 60-63 provides a unique opportunity for those behind to boost retirement savings.

[Related Read: 401(k) Balance by Age: How Do You Measure Up?]

Who Should Take Advantage of the Super Catch-Up 401(k) Contribution?

If you’re between the ages of 60 and 63 starting in 2025, the super catch-up 401(k) contribution is an opportunity to significantly boost your retirement savings. 

Here’s why and how to make the most of it:

• Catch Up on Lost Time: If life circumstances or financial priorities earlier in your career left your retirement savings lagging, now is your chance to close the gap. This contribution option is tailored for individuals who may have fallen behind and need to accelerate their savings.
• Leverage Employer Matching: If your employer offers 401(k) contribution matching, every extra dollar you save could mean additional funds from your employer. Make sure you’re contributing enough to take full advantage of this benefit – it’s essentially free money toward your future.
• Prioritize Your Budget: Retirement savings should be a top priority, especially if you’re eligible for the super catch-up limit. Consider reducing discretionary expenses, selling unused assets, or using bonus income to maximize your contributions.
• Consult a Financial Advisor: If you’re unsure how much to contribute or how this fits into your broader financial plan, now is the time to reach out to a professional. They can help you determine how much you need to save and create a roadmap for meeting your retirement goals.
• Understand the Impact: Even small increases in your contributions can make a significant difference over time. By taking full advantage of the super catch-up limit, you may be setting yourself up for a more comfortable and secure retirement.

Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

Sources:

1. https://www.forbes.com/sites/bobcarlson/2024/05/24/how-much-money-do-you-really-need-to-retire-comfortably/
2. https://www.foxbusiness.com/markets/inside-americas-retirement-income-crisis

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Allianz Life’s 2024 Annual Retirement Study is out, and it shows a whole lot of Americans lack plans for retirement income.

In fact, more than half of Americans do not have a plan in place for retirement.¹

If that isn’t troubling enough, in a report entitled Americans Face Alarming Retirement Savings Shortfall, the National Institute for Retirement Security found , “Most Americans will not have enough money for a financially secure retirement. […] NIRS research found that for Generation X, a generation that is quickly approaching retirement and the first that will retire largely without pensions, the bottom half of earners have only a few thousand dollars saved for retirement. This means the vast majority of Gen Xers are not even close to having enough savings to retire. And when Americans don’t have adequate retirement income, they are more likely to fall into poverty or turn to public assistance programs or families to make ends meet.”²

Retirement income is not something that will just fall into place. You cannot wing it.

A safe and secure retirement requires plans for retirement income.

56% of Americans Do Not Have a Plan for Retirement

According to Allianz Life’s 2024 Annual Retirement Study, “Less than half of Americans (44%) say they currently have a plan for how they will take income in retirement. Boomers (67%) are more likely than Gen Xers (30%) or millennials (33%) to say they have a retirement income plan.”³

While it is good that older Americans have more plans in place than their younger counterparts, those Gen Xers are quickly approaching retirement age themselves.

Without plans for retirement income, they may find themselves in the same spot as many elderly Americans are today – relying on family members to take care of them or having to forego essential needs.

Kelly LaVigne, VP of consumer insights at Allianz Life, explains, “If you don’t know how you will draw from your retirement assets for income, then you aren’t ready to retire. […] So much of retirement preparation focuses on accumulating assets – and that’s important – but it is critical to understand how those assets will be able to fund your life after you retire. To do that, you need to make important decisions like when to start claiming Social Security and examine what resources you have to fund your retirement.”⁴

[Related Read: What to Do If You’re Nearing Retirement with Less Savings Than Expected]

48% Worry They Will Have to Live Frugally

According to the study, “Nearly half (48%) worry about living too frugally and not enjoying retirement as much as they should.”⁵

LaVigne adds, “Without a solid strategy, the ongoing process of deciding how much money to withdraw from which account when can be daunting.”⁶

Without solid plans for retirement income, you’ll be forced to make decisions on the go.

With so many factors determining costs, this can be especially tricky.

For instance, rising costs have led to “about one in four adults 65 and older and three in 10 aged 50-64 cut back on food, utilities, clothing or medication due to healthcare costs.”⁷

Older Americans are finding themselves having to sacrifice basic needs to cover healthcare costs.

Given this is the case, it is understandable why almost half of those in this study worried they will have to live frugally during retirement and won’t be able to enjoy it.

The way around this fear is to make plans for retirement income before the time comes. 

45% Worry about How to Take Distributions to Cover the Cost of Retirement

Given the rising cost of retirement, the study also found that many Americans are concerned about how to responsibly take distributions.

According to Allianz Life’s 2024 Annual Retirement Study: 

Americans identified the greatest risks to their retirement income:

• Everyday costs increasing (42%)
• Outliving money (35%)
• Healthcare costs (32%)
• Stock market dropping (31%)
• Spending too much and running out of money (30%).⁸

This is why it is so important to make plans for retirement income.

You need to have a plan for how you draw from your assets and where you will find additional income. 

Get a Plan in Place for Retirement

You don’t want to be like most of those who participated in this study. 

You want a plan for your retirement.

Fortunately, there is still time to make plans for retirement income and get the ball rolling.

• Do Not Raid Your 401(k): Make a promise to yourself to keep your money where it is and allow it to grow until the time comes. Raiding your retirement accounts may cost you in the future. It can impact the quality of your retirement, have negative tax consequences, and cost you money and opportunity.
  
• Figure Out How to Contribute More Now: With years to go before retirement, make the most of your contributions. Continue to contribute enough to receive the company match. And then contribute some more! Every extra bit helps.
• Consider Your Individual Retirement Needs and Wants: Take time to think about the retirement you need and want – and then consider if it is possible. While you may daydream about living at the beach and golfing daily, this may not be realistic. Instead, start with your true retirement needs. Calculate how much you need to make this happen.
• Set a Timeline: It’s important to think about when you want to retire. For example, it is smart to know when you want to start claiming Social Security – especially considering the longer you work, the more you may draw from Social Security. Likewise, the longer you wait to withdraw from your 401(k), the more time it has to grow. Use this timeline to boost your retirement savings.
• Think about Different Ways to Fund Retirement: Once you have an idea of when and how you want to retire, think about different ways to fund your retirement. Calculate how much you expect to receive from Social Security. Then, figure out how much more you’ll need to retire safely. What can you do to cover this gap? How much do you already have saved? Is it possible to utilize catch-up contributions? Do you have any other assets or investment opportunities? Are you open to working part-time during retirement?
• Seek Professional Help: Creating plans for retirement income isn’t easy. It is beneficial to seek help from a professional who can help you come up with a strategy to utilize retirement funds in a way that lasts the rest of your lifetime.

If you have questions about your 401(k) or if you need help, we’re here for you. Click below to book a complimentary 15-minute 401(k) Strategy Session.

Book a Strategy Session

SOURCES

1. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
2. https://www.nirsonline.org/2024/02/americans-face-alarming-retirement-savings-shortfall-according-to-national-institute-on-retirement-security-testimony-before-u-s-senate-committee/
3. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
4. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
5. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
6. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
7. https://news.gallup.com/poll/393494/older-adults-sacrificing-basic-needs-due-healthcare-costs.aspx#:~:text=For%20substantial%20proportions%20of%20older,medication%20due%20to%20healthcare%20costs
8. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income

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There are many Thanksgiving traditions we enjoy, yet often participate in them without knowing their origins.

For instance, why do we eat turkey?

Why do we watch a parade with giant inflatable character balloons? 

And when did Friendsgiving become a thing?

Keep reading for 12 popular Thanksgiving traditions, and you might just be the smartest person at the table this year.

#1 The Original Thanksgiving

Most of us are familiar with the story of the first Thanksgiving.

In November 1621, after the Pilgrims’ first corn harvest proved successful, the Pilgrims invited their Native American allies to a celebratory feast, which is considered the first Thanksgiving.

However, did you know that the first Thanksgiving actually lasted 3 whole days?¹

And while we traditionally recognized the Pilgrims’ meal with the Native Americans, many historians believe this was not the first meal of this type in the Americas.

According to History.com, “In 1565, nearly 60 years before Plymouth, a Spanish fleet came ashore and planted a cross in the sandy beach to christen the new settlement of St. Augustine. To celebrate the arrival and give thanks for God’s providence, the 800 Spanish settlers shared a festive meal with the native Timucuan people.”²

#2 Thursdays Are for Thanksgiving

Thanksgiving is officially celebrated on the fourth Thursday of November – but that came after a fight.

While Thanksgiving had been celebrated on the last Thursday of November since President Lincoln was in office, President Franklin D. Roosevelt decided to change things up in 1939, hoping to boost holiday sales by giving shoppers an extra week. 

He moved Thanksgiving to the second to last Thursday of November, which meant it fell on the third Thursday rather than the fourth.

People were not happy with his decision and referred to it as Franksgiving.

Ultimately, Roosevelt’s plan failed after his rivals and Thanksgiving traditionalists compared him to Hitler.

Time explains, “By the end of 1941, Roosevelt had signed a bill officially sticking Thanksgiving on the fourth Thursday of November, whether or not it was the last Thursday of the month.”³

#3 Thanksgiving Meal Traditions

Today’s typical Thanksgiving meal usually includes a turkey, dressing, and cranberry sauce.

But this is not what the first Thanksgiving meal looked like – or even what it looks like in different parts of the country today.

The first Thanksgiving dinner included corn, venison, and wildfowl.

Not turkey.

Today, some places in America have their own versions of Thanksgiving dinners, such as Hawaiian luaus with a main dish of pig or New England states enjoying lobster instead of turkey.

#4 Thanksgiving Turkey

Back to the turkey…

While turkey hasn’t always been on the Thanksgiving menu, it is now synonymous with the holiday.

According to the History Channel, almost 90 percent of Americans eat turkey, whether roasted, baked, or deep-fried on Thanksgiving.⁴

#5 Turkey Pardons

One of the stranger Thanksgiving traditions is the annual public turkey pardoning ceremony.

“Beginning in the mid-20th century and perhaps even earlier, the president of the United States has ‘pardoned’ one or two Thanksgiving turkeys each year, sparing the birds from slaughter and sending them to a farm for retirement.”⁵

In addition to presidential turkey pardons, many state governors pardon turkeys.

#6 Thanksgiving Parades

The very first Macy’s Thanksgiving Day Parade took place in 1924.

Instead of the giant inflatable character balloons we see today, this first parade had live circus animals.

The animals were replaced as the parade began introducing the iconic character balloons in 1927.

Another interesting tidbit about Macy’s Thanksgiving Day balloons: “From 1929 to 1931, Macy’s would release the balloons at the end of the parade. Those who found the balloons could return them to Macy’s for an award. The practice ended when a balloon got caught in a plane’s propeller when a pilot was trying to catch it.”⁶

The Macy’s Thanksgiving Day Parade has taken place every year except the 3 years during WWII.

Today, it has about 50 million television viewers and typically has 3.5 million on-site spectators.⁷

#7 Football Games

It’s not uncommon to fill up on turkey and sit back and watch a big rivalry game on TV.

This tradition goes way back. 

The first Thanksgiving game was between Harvard and Yale on Thanksgiving Day, 1876.

After this game, it became a tradition to have rivals play against one another on the holiday.

Once the NFL was founded in 1920, they began hosting Thanksgiving football games.⁸

#8 Volunteering

Thanksgiving is one of the most popular days of the year for Americans to volunteer.

In fact, many volunteer organizations wind up having as many volunteers as they do the people they are serving.

Sometimes, organizations even have to turn volunteers away.⁹

When you get the urge to volunteer to express your gratitude this Thanksgiving, consider donating or signing up to volunteer after the busy holiday season.

#9 Turkey Trots

One of the most popular Thanksgiving traditions, the turkey trot (aka an outdoor race), got its start in Buffalo, New York, on Thanksgiving Day in 1896.¹⁰

Turkey trots are now the most popular day for races in America and “[draw] nearly a million participants to more than 1,000 different events across the country.”¹¹

#10 Pumpkin Pie

I cannot imagine Thanksgiving without pumpkin pie.

But desserts were not on the original Thanksgiving table.

Based on the journals from Pilgrim colonists, historians believe that the Mayflower’s sugar supply had shrunk significantly in 1621 by the time they had their Thanksgiving feast.

That means there were not any of the desserts we’ve come to associate with Thanksgiving.¹²

#11 Thanksgiving Travel

The Sunday after Thanksgiving is typically the busiest airport day of the year. 

NerdWallet reports, “In 2021, 2022, and 2023, it was the busiest single day of the entire year at U.S. airports, based on TSA passenger data. Last year, more than 2.9 million people crossed through U.S. airport security checkpoints on the Sunday after Thanksgiving. Compare that to Thanksgiving Day, when just 1.5 million people (slightly more than half of Sunday’s figures) were at an airport.”¹³

#12 Friendsgiving

Today, it is becoming quite common for people to celebrate Friendsgiving rather than or in addition to Thanksgiving.

According to the New York Post, “Seven in 10 young Americans prefer ‘Friendsgiving’ over a traditional Thanksgiving. […] A poll of 2,000 Americans – aged 18-38 – found 68 percent say celebrating Friendsgiving is their preferred method of engaging in the autumnal celebration.”¹⁴

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SOURCES

1. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
2. https://www.history.com/news/thanksgiving-history-trivia-facts
3. https://time.com/3603622/fdr-moved-thanksgiving/
4. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
5. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
6. https://www.nbcnewyork.com/entertainment/holidays/see-how-thanksgiving-day-parade-balloons-have-changed-over-the-years-and-other-fun-facts/4882894/
7. https://www.scholastic.com/parents/family-life/parent-child/macys-thanksgiving-day-parade-trivia.html
8. https://www.history.com/news/why-do-americans-watch-football-on-thanksgiving
9. https://dcist.com/story/18/11/21/if-you-havent-already-signed-up-to-volunteer-on-thanksgiving-its-probably-too-late/
10. https://www.outsideonline.com/health/running/best-turkey-trots-america/
11. https://www.runnersworld.com/races-places/a20862856/how-the-turkey-trot-became-the-most-popular-race-in-america/
12. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
13. https://www.nerdwallet.com/article/travel/busiest-travel-days-thanksgiving
14. https://nypost.com/2019/11/18/most-young-people-enjoy-friendsgiving-more-than-thanksgiving/

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As our parents age, it’s natural to start worrying about their financial well-being.

But how do you approach a conversation about money with the very people who raised you?

We get it. It’s awkward.

According to a Bankrate survey, “Americans think money is more taboo to talk about than their political or religious views.”¹

Specifically, “Only 38% of U.S. adults are comfortable discussing their bank account balances with family members or close friends, a smaller percentage than those comfortable discussing their love lives (47%), credit card debt (52%), weight (71%), political views (78%), religious views (81%) or health (81%).”²

With the holidays right around the corner, we encourage you to lean into this taboo financial conversation.

And be thankful that you have an opportunity to talk to your parents about their finances before you are forced to.

Read on to see why it is so important to talk to your parents about their finances sooner rather than later.

The Right Time to Talk to Your Parents about Their Finances

There may never be a moment when you feel ready to talk to your parents about their finances – it’s a challenging subject for anyone. 

But waiting too long can have serious consequences.

According to a study by Home Instead Senior Care, “Given the severe consequences of waiting too long to have this critical conversation, if your parents are approaching 70 and you are approaching 40, you should have ‘the talk’ about critical aging issues.”³

In other words, if you are part of the sandwich generation, it’s time to have this conversation.

“The sandwich generation consists of adults with a parent 65 years or older who are raising a minor or providing for an adult child.”⁴

Those in the sandwich generation are having to take care of their own children, their aging parents, and themselves.

“On average, 48% of adults are providing some sort of financial support to their grown children, while 27% are their primary support. Additionally, 25% financially support their parents as well. Some of the adults living in this sandwiched generation face financial problems regularly, having to support three generations at one time.”⁵

For those caring for children while nearing retirement, there’s a real possibility of also needing to care for your parents. 

That’s why it’s crucial to discuss your parents’ finances sooner rather than later – so you can also prepare.

While it’s recommended to have this conversation if you’re around 40 and your parents are around 70, it’s also wise to initiate it if a parent is diagnosed with a life-threatening illness or begins to show signs of cognitive decline.

Clarifying Expectations Is Critical

In a Fidelity Investments survey, 60% have seen family members or friends lose their ability to manage their daily finances as they age, and 40% said they have had to help manage their parents’ finances.

Yet only 9% of those surveyed think they could end up in a similar situation.⁶

As much as we don’t want to think about it, our parents are getting older, and something could happen that puts us (their children) in the driver’s seat.

We don’t know what the future holds.

If your parents are critically ill, would they be able to afford healthcare or long-term care? Or are they expecting to move in with you? 

If your parents pass away, do you know what will happen to their property? Do you know who will be put in charge of executing their estate? 

Consider these findings from a Fidelity Investments study.

• 92% of parents expect their children will assume the role of executor; however, 27% of children identified as executor didn’t know this was expected of them.
• 69% of parents expect one of their children will help manage their investments in retirement; however, 36% of kids identified in this role didn’t know this was expected of them.
• 72% of parents expect one of their children will assume long-term caregiver responsibilities in retirement if needed; however, 40% of children identified as the caregiver didn’t know this was expected of them.⁷

Unfortunately, many adult children find themselves blindsided by their parents’ financial situations or end-of-life requests because it has never been spoken about.

Don’t let this happen to you.

While your parents are still able, have the difficult conversation with them.

What You Need to Know about Your Parents’ Financial Situation

Tell your parents you’d like to discuss their future plans so that you will be better able to assist them when the time comes and honor their wishes.

Then, direct the conversation to specific topics related to their financial situation.

• Retirement Plans: If your parents have not yet retired, ask them about their retirement plans. When do they expect to retire? Where do they plan to live during retirement?
• Retirement Income: What is their plan for income during retirement? Do they have adequate 401(k) savings? How much do they anticipate receiving from Social Security? Do they have any investments that will provide income or any additional income streams?
• Needs: What will they need from you? For example, do they have long-term care insurance, or are they planning to move in with you when the time comes? Do they have enough savings or income to cover costs? Do they have debt they will need help with?
• Inheritance: While you don’t want to appear greedy, it is wise to ask your parents about any potential inheritance. You don’t want to mistakenly believe you will be receiving an inheritance to find out that not only is this not true, but you will need to sell the family home to cover your parents’ debts. Asking about this possibility is uncomfortable but necessary.

Estate Plans and End-of-Life Life Wishes: Ask your parents if they have a will in place and if there are any end-of-life documents you should be aware of. For instance, some parents have already purchased a grave plot and have set money aside for funeral costs in advance so that their children will not have to. Then again, many parents have not, and it is up to their children to make these arrangements. While you have the opportunity, have the hard conversation. It will be much easier to navigate ahead of time instead of during the time of loss.

Additional Tips for the Difficult Conversation

It is challenging to talk to your parents about their finances, but it is important.

If the conversation leaves you feeling frustrated, don’t give up. Your parents may not have all the answers to your questions yet.

Give them some time, and encourage your parents to meet with a financial advisor.

Note –  If you are already aware that your parents will need financial assistance from you, it is also wise for you to speak to a financial advisor – especially if you are a part of the sandwich generation.

Keep the conversation going. It doesn’t have to be a one-time discussion over dinner.

The overall goal is to let your parents know you are trying to make sure everyone is on the same page so you can help one another.

Stacie Irving explains, “No one is excited to have these conversations, but everyone feels relief once the door has been opened and a financial plan has been made.”⁸

Better Prepare for a Life of Abundance in Retirement.
Check us out on YouTube.

Click Here

Sources

1. https://www.bankrate.com/credit-cards/news/financial-taboos-survey/?tpt=a
2. https://www.bankrate.com/credit-cards/news/financial-taboos-survey/?tpt=a
3. https://www.prnewswire.com/news-releases/study-finds-most-families-wait-too-long-to-begin-aging-conversations-270894401.html
4. https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=541f05bf2af4
5. https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=541f05bf2af4
6. https://getcarefull.com/articles/why-you-should-talk-to-your-adult-children-about-your-finances
7. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/Family-Finance-Infographic.pdf
8. https://www.care.com/c/financial-conversations-to-have-with-aging-parents/

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The IRS announced changes to retirement contribution limits to help workers boost their retirement savings with cost-of-living adjustments. 

Whether you’re saving through a 401(k), IRA, or another retirement plan, these updates can help you plan to maximize your contributions and ensure your retirement fund grows over time.

401(k) Retirement Plan Contribution Limits for 2025

401(k)s: The contribution limit has increased to $23,500 in 2025, up from $23,000 in 2024. For workers aged 50 and above, there is no increase in catch-up contribution limits. It remains $7,500 ($31,000 total).

The SECURE 2.0 higher catch-up contribution limit applies for those aged 60-63 starting in 2025. This means participants in that age range may contribute an additional $11,250 instead of $7,500.

Solo 401(k)s: Self-employed individuals with a solo 401(k) can also contribute up to the new 401(k) limit of $23,500, along with catch-up contributions if eligible.

IRA Contribution Limits for 2025

IRAs: The contribution limits for a traditional or Roth IRA remain the same for 2025.

You can contribute a maximum of $7,000 (same as 2024).

Catch-up contributions for taxpayers 50 and older are also subject to cost-of-living adjustments, but these limits remain unchanged for 2025 at $1,000 ($8,000 total).

**You can contribute the maximum for 2024 until Tuesday, April 15, 2025. If you have an IRA, plan now to maximize the contribution limit for 2024 before April next year.

SEP IRAs: Contribution limits for SEPs, or Simplified Employee Pensions, in 2025 is up to $350,000 of compensation and is limited to a maximum annual contribution of $70,000, up from $69,000 in 2024.

SIMPLE IRAs: The individual contribution limit for SIMPLE IRAs will rise to $16,500 in 2025, up from $16,000 in 2024. For employees aged 50 and above, the catch-up contribution remains an extra $3,500, allowing those over 50 to contribute up to a total of $20,000.

For employees aged 60 to 63, an even higher catch-up limit applies. In 2025, this additional catch-up contribution is set at $5,250.

Under SECURE Act 2.0, certain SIMPLE accounts have an increased contribution limit. For 2025, the elevated contribution cap for these accounts is $17,600, with a catch-up option of $3,850 for employees aged 50 and above.

Deductible IRA Phase-outs for 2024

• For singles and heads of household who are covered by a workplace retirement plan, such as a 401(k), and contribute to a traditional IRA, the phase-out range increased to between $79,000 and $89,000, up from between $77,000 and $87,000 in 2024. This means individuals earning over $89,000 won’t qualify for any deduction, while those with incomes between $79,000 and $89,000 may receive a partial deduction.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $126,000 and $146,000 – up from between $123,000 and $143,000.
• If you contribute to an IRA but are not covered by a workplace retirement plan and are married to someone who is, the phase-out range is increased to between between $236,000 and $246,000, up from between $230,000 and $240,000 last year.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and is between $0 and $10,000.

Remember you can still contribute to an IRA even if you earn too much – it’s just nondeductible.

Roth IRA Phase-outs for 2025

The income phase-out range for the Roth also increases in 2025. 

• The income phase-out range for singles and heads of household making contributions to a Roth IRA is increased to between $150,000 and $165,000, up from between $146,000 and $161,000 in 2024.
• For married couples filing jointly, the income phase-out range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000 in 2024.
• The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Saver’s Credit Limits for 2025

For low and moderate income workers, the new Saver’s Credit (also known as the Retirement Savings Contributions Credit) limit is increasing.

• For married couples filing jointly: The new Saver’s Credit limit is $79,000, up from $76,500 last year.
• For heads of household: The limit is now $59,290, up from $57,375.
• For singles and married couples filing separately: The limit is $39,500, up from $38,250.

Distributions for Domestic Violence Victims

Ordinarily, an early withdrawal from a retirement plan incurs a 10% additional tax (early withdrawal penalty) unless an exception applies. 

Under the SECURE Act 2.0, victims of domestic abuse now qualify for an exception. This exception permits withdrawals of up to $10,000 (adjusted annually for inflation) or 50% of the vested accrued benefit in the plan, whichever amount is lower. 

For 2025, the limit has increased from $10,000 to $10,300.

Qualified Charitable Distributions (QCD)

With a qualified charitable distribution, you can transfer funds directly from your IRA to a qualifying charity. 

This contribution can count toward your required minimum distributions (RMDs) for the year and is excluded from taxable income – no itemization required.

For 2025, the maximum amount you can exclude from your gross income through QCDs has risen to $108,000, an increase from the 2024 limit of $105,000.

Additionally, under SECURE 2.0, there’s a one-time option to make a QCD to a split-interest entity. Originally capped at $50,000, this amount, adjusted for inflation, is now $54,000 in 2025, up from $53,000 in 2024.

Qualified Longevity Annuity Contracts (QLACs)

A QLAC enables you to turn funds from a qualified retirement account, such as a 401(k) or IRA, into an annuity. In 2025, the maximum allowable premium for a QLAC has increased to $210,000, up from the previous $200,000 limit in 2024.

Have questions about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

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Many Americans are potentially missing out on retirement savings by falling victims to the 401(k) to IRA rollover cash trap.

According to Andy Reed, head of investor behavior research at Vanguard, “IRA cash is a billion-dollar blind spot.”¹

A recent report from Vanguard found that almost two-thirds of rollover investors unintentionally hold cash without investing it.²

Keep reading to see if you may be one of the 401(k) to IRA rollover cash trap victims. 

Explaining the 401(k) to IRA Rollover Cash Trap

401(k) rollovers shouldn’t be complicated, but they are.

We’ve written about costly 401(k) rollover mistakes and how to avoid them.

However, another kind of rollover issue affects many Americans without them even knowing it.

This is the 401(k) to IRA rollover cash trap.

When investors roll over their 401(k) to an IRA, either because they are changing jobs or retiring, they may unintentionally allow the rollover assets to park as cash for months and sometimes years.

This is called “holding cash” or “parking cash.”

The problem is that investors aren’t holding cash on purpose – they simply do not know that rollovers are held in cash as a default.

Andy Reed, head of investor behavior research at Vanguard, explains, “Many IRA holders want to invest their retirement savings in the stock market and think that they’re invested following a rollover. In reality, they’re sitting in money market funds.”³

Vanguard found, “Close to 50% of those investors mistakenly believed that IRA contributions were automatically invested and 46% did not realize their contributions were allocated to money market funds by default.”⁴

This is especially true for those enrolled in target-date funds who mistakenly assumed that once they rolled over their 401(k) to an IRA, it would work the same way.

The critical difference is that the investor must decide to move the cash and invest.

But most don’t understand this to be true.

Vanguard found that 68% don’t realize how their assets are invested and are not intentionally holding cash.⁵

For example, “About 48% of people (incorrectly) believed their rollover was automatically invested.”⁶

You must take steps to ensure your cash doesn’t stay parked and, instead, is giving opportunities to move and grow.

Why Holding Cash May Not Be the Right Choice for Investors

There is a right time for holding cash – but retirement isn’t it.

Generally, holding cash is a good idea when you are saving money for something in the immediate future, such as a down payment on a home. Or to have in your emergency fund.

But, if you have a substantial amount of cash you want to use in retirement, it should be invested.

The interest accrued on cash savings will be much more limited than if it were invested.

Global Asset Management produced a hidden cash cost analysis over a 20-year period.

According to their data, to reach a $500,000 savings goal:

• If you invest in a balanced portfolio, you would need to contribute $305,000 over 20 years ($15,250 per year).
• If you keep your money in cash, you would need to save $431,000 over 20 years ($21,550 per year).
• The hidden cost of cash is $126,000 ($6,300 per year). This is because your cash investments don’t offer nearly as much growth potential as the balanced portfolio. So if you want to save $500,000 over the same time period, you would have to make larger contributions.⁷

The return on cash is simply too small when you are looking at long-term finances.

It’s An Easy Mistake to Make

The 401(k) to IRA rollover cash trap is an easy mistake to make.

According to Vanguard, “It tends to be an error of omission rather than commission: They are twice as likely to hold cash unintentionally as they are to do so deliberately.”⁸

Investors simply forget and do not move the money from its parking spot to the right investment allocation.

Even those who have dutifully saved for retirement may not even be aware that they have rollover assets holding in cash. 

On the other hand, some investors are simply overwhelmed by the number of IRA investment options.

Vanguard explains, “While 401(k) plans typically offer a limited menu of funds handpicked by plan sponsors, IRAs offer thousands of choices among funds, individual stocks, bonds, certificates of deposit, and other asset classes. That plethora of choices can be unwelcome: One in four rollover cash investors reported feeling overwhelmed by the number of options.”⁹

This results in choice overload and decision paralysis.

How to Avoid the 401(k) to IRA Rollover Cash Trap

Staying in cash can result in missed opportunities to earn investment returns, potentially leading to retirement shortfalls.

To avoid this mistake, investors should closely examine their portfolios after a rollover to ensure they are allocated appropriately for their long-term plans.

It is critical to stay engaged with your retirement accounts. 

Be an active investor.

Regularly review and adjust IRA allocations based on your retirement goals and risk tolerance to ensure long-term success.

Seek Help Before You Make a Rollover Mistake

Understanding all rollovers before you make a move is important, and seeking professional help is just as important. 

Speak with a financial advisor to learn about the differences between 401(k) plans and IRAs, particularly regarding automatic investments. 

Ask for guidance when it comes to making decisions about what to do with the cash from a 401(k) to an IRA rollover. 

Each investor’s situation is unique, and speaking with someone may help you avoid costly 401(k) rollover mistakes and make the best decision possible for your financial future.

Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

Sources: 

1. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
2. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
3. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html
4. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html
5. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
6. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
7. https://www.rbcgam.com/en/ca/learn-plan/investment-basics/the-hidden-cost-of-too-much-cash/detail
8. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html
9. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html

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