Nearing Retirement in 2025: Key Financial Changes to Know

As you approach retirement, it's essential to stay informed about the changes that could impact your financial situation. In 2025, several updates to Social Security, Medicare, and retirement savings plans may affect your retirement planning and income. Here's what you need to know:



1. Social Security payments and Medicare costs
Social Security recipients will see a 2.5% cost-of-living adjustment (COLA) in 2025, increasing the average monthly payment from $1,927 to $1,976. However, this increase may be offset by a $10.30 rise in Medicare Part B premiums, from $174.70 to $185 per month. Additionally, the annual deductible for Part B will increase by $17, from $240 to $257. Retirees should consider these changes when planning their budgets and explore options like Medicare Advantage plans or Part D prescription drug plans to manage costs.

2. New 'uper catch-up' contribution limits for employer-sponsored retirement plans
Starting in 2025, workers aged 60 through 63 will be able to make bigger catch-up contributions to employer-sponsored retirement plans, up to $11,250 over the standard limit, for a total of $34,750. This change provides an opportunity for those nearing retirement to save more for their golden years. To maximize the benefits of this new limit, consider the following strategies:
* Maximize your contributions to the new limit if you can afford it.
* Review your financial situation and retirement goals to determine how much you can contribute.
* Diversify your investments to minimize risk.
* Review your retirement plan annually to ensure you're on track to meet your goals.



3. Inherited IRAs and required minimum distributions
In 2025, non-spouse beneficiaries of inherited IRAs must take distributions from their account every year until the end of the 10-year period, when the account must be completely emptied. If someone fails to take a distribution by the deadline, they could face a penalty worth up to 25% of the undistributed amount. Retirees should be aware of these changes and plan accordingly, especially if they are beneficiaries of an inherited IRA.



By staying informed about these changes and adjusting your retirement planning accordingly, you can better prepare for the financial landscape of 2025. Keep an eye on updates from the Social Security Administration, Medicare, and other relevant sources to ensure you're making the most of your retirement savings and benefits.