What’s New in the New Year: 5 IRS Changes in Retirement Plans
January 14, 2025
By Andi McNamara, CFP®
Vice President, Director of Financial Planning
Washington Trust Wealth Management
With 2025 upon us, there are five IRS cost-of-living adjustments for retirement plans that could impact your financial strategy. Here’s what you need to know.
1. Inherited IRAs: Required Minimum Distributions Begin
If you inherited an IRA after 2019, the SECURE Act of 2019 introduced the 10-year rule, requiring you to distribute the full account balance by the end of the tenth year following the original owner’s death. Starting in 2025, you’ll also need to begin taking annual Required Minimum Distributions (RMDs).i The exact amount will depend on the account balance and your life expectancy factor.
2. Qualified Charitable Distributions (QCDs): Higher Limit for 2025
Good news for charitably inclined investors aged 70½ or older: the annual limit for Qualified Charitable Distributions (QCDs) has increased to $108,000 in 2025.ii This is a considerable bump from previous years and offers a great opportunity to satisfy your RMD while supporting causes close to your heart. Remember, QCDs count as nontaxable distributions if sent directly to a qualified charity.
3. New 401(k) Catch-Up Contributions for Ages 60-63
Effective for the 2025 tax year, active participants aged 60 through 63 can contribute the greater of $10,000 or 150% of the 2024 catch-up contribution limit that is indexed for inflation. For 2025, the max catch-up contribution is $11,250. In 2025, the total limit for 401(k) contributions for those aged 60 to 63 is $34,750. That number includes a $23,500 contribution limit and a catch-up contribution of $11,250.
4. New 401(k) and General IRA Contribution Limits
The standard 401(k) contribution limits have increased in 2025 to $23,500, up from $23,000 for 2024. Plans included under this includes 401(k), 403(b), most 457 plans, and the Thrift Savings Plan. For 2025, the contribution limit for both traditional and Roth IRAs remains at $7,000, consistent with 2024. Taxpayers aged 50 and older can contribute an additional $1,000 in catch-up contributions, bringing their total to $8,000, consistent with 2024 limits.iii
5. Changes in Phase-Out Ranges
The IRS has also made some changes to phase-out ranges for traditional and Roth IRAs. If either you or your spouse were covered by a retirement plan at work during the year, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither you nor your spouse are covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Find the IRS phase‑out ranges for 2025 here.
Washington Trust Wealth Management Can Help
Our wealth advisors can work with you to understand new tax updates and adjust your financial strategy accordingly. Together, we’ll start the new year on solid footing and make 2025 a strong year for your investments.
Connect with a wealth advisor
No matter where you are in life, we can help. Get started with one of our experts today. Contact us at 800-582-1076 or submit an online form.
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By accessing the noted link you will be leaving Washington Trust's website and entering a website hosted by another party. Washington Trust is not responsible for, nor do we control, endorse or guarantee the content of any external sites. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Washington Trust's website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Washington Trust.
By accessing the noted link you will be leaving Washington Trust's website and entering a website hosted by another party. Washington Trust is not responsible for, nor do we control, endorse or guarantee the content of any external sites. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Washington Trust's website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Washington Trust.
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