New Year, New Goals

January can be a great time to make some changes for the year ahead! If you have retirement or college savings goals for this year, knowing contribution limits and annual exclusion amounts can allow you to set a schedule now to reach your goals by year end.

In 2025, IRA contribution limits remain the same at $7,000 for anyone under 50 and $8,000 for people 50 or over. If you didn’t reach your IRA contribution limit last year, you still have until April 15, 2025 to make any 2024 IRA contributions.

Please note that people with income over a certain amount are not eligible to make Roth IRA contributions. In 2025, if your Modified Adjusted Gross Income (MAGI) as a single filer is over $165,000 or as joint filers over $246,000, you are ineligible to make Roth IRA contributions. If your income is below $150,000 for single filers and $236,000 for joint filers, you can make the full contribution, but the amount allowed progressively dwindles as you approach the $165,000 and $246,000 cut off point.

The contribution limits for 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan increased in 2025 to $23,500 for participants under the age of 50. Participants 50 and over in such plans can contribute $31,000 in 2025. In addition, the SECURE 2.0 Act allows a new higher catch-up contribution limit for participants aged 60 through 63, so they may contribute $34,750 in 2025.

With the new year also comes a new annual gift tax exclusion amount. For 2025, an individual may give up to $19,000 per recipient tax-free without using up any of their lifetime gift and estate tax exemption (which is set to $13.99 million in 2025). Married couples can give up to $38,000 to an individual and remain within the annual gift tax exclusion amount. These gift tax rules apply to a parent’s or anyone else’s contributions to a child’s 529 plan, so this enables the possibility to save more for a child’s college education this year.

Knowing these limits can help you adjust your automated contributions for either retirement or college savings at the beginning of the year to maximize your savings.