Setting Yourself Up for Success in 2025
Stone Churby, M.S. | Kelli Burger, CFP® Wealth Management Advisor, Partner | January 23, 2025
After a historic 2024, the New Year provides an opportunity for people to check in with themselves about their personal and financial goals. Life events, career changes, and a new administration may create fresh opportunities for financial planning for you and your family. As we step into 2025, the financial landscape continues to evolve; shaped by shifting economic trends, emerging technologies, and changing personal priorities. Whether you’re planning for retirement or investing in your future, planning has never been more essential. This year brings new opportunities and challenges from navigating the investment environment to potential changes in the tax code. The following will explore some practical strategies and actionable tips and insights to help you make informed decisions towards achieving your financial goals this year and beyond.
Financial Plan/Health Check-in
Similar to checking in with your physical health, a new year provides the perfect opportunity to check-in on your financial well-being.
Unexpected medical events can be very costly if not planned for correctly. It is important to review health, disability, and long-term care insurances to confirm their best application to your situation.
- For those covered by high-deductible health insurance plans, the healthcare savings account (HSA) contribution limit for 2025 increased to $4,300 for individuals ($1,000 catch-up for individuals aged 55+) and $8,550 for families.
The WAM team also likes to review financial plans with clients on an annual basis for adjustments to assumptions on spending, retirement and outside account balances. Identifying “gap years” when income is lower can offer a variety of planning opportunities.
- If you are anticipating a lower tax year, you may want to explore a Roth conversion. The conversion allows a transfer from a Traditional IRA or 401(k) to a tax-free Roth after paying the deferred income tax.
- If you have an executive compensation plan including stock options, we can collaborate on when and how to exercise your options to minimize your tax liability.
Social Security analysis is integral to financial planning. If you are planning to work past full retirement age (FRA), it may be beneficial to defer collecting Social Security benefits. We elaborated on strategies relating to Social Security, Medicare and Medicare premiums in a previous blog.
Investment Portfolio/Rebalance
The financial plan and gap year analysis may also showcase years in which realizing capital gains or exercising stock options would come with a lesser tax bill.
- A new year brings a new slate for capital gains. Our team collects tax returns annually to review for long-term capital loss carry forwards and net operating losses (NOLs) to help with planning for taxable portfolios.
- Projected income from your investment portfolio can vary year-to-year. It is important to understand the projected income stream to have a solid grasp on inflows and outflows for the upcoming year.
- Identifying and planning for large or extraordinary cash flows in advance allows our team to be strategic about raising funds in the portfolios. We can also communicate capital gain implications with your tax professional throughout the year to ensure adjustments to estimated tax payments are made as appropriate.
- Changes in your financial picture may call for a review of your asset allocation or investment profile. Growing families, employment changes, and inheritances may provide changes to your cash flow needs and risk tolerance.
Retirement Planning/Income/Taxes
Individuals participating in active plans should be aware of new contributions and deferral limits for the upcoming year. The deductibility of contributions, phase outs and options for maximizing deferrals are key to review with your advisor annually.
- Traditional/Roth IRA – IRAs will have the same contribution maximum ($7,000 with an additional $1,000 for individuals over 50). However, Roth IRA phaseout limits have been adjusted slightly upward.
- 401(k) – Salary deferrals have been increased to $23,500 with the age catch-up remaining at $7,500.
- Defined Compensation Plans (DCPs) – All retirement plans categorized as DCPs (Profit Sharing Plans, 401(k), 403(b), Money Purchase, etc.) will see the annual Section 415 limit increased to $70,000.
- Defined Benefit Plans – All defined benefit plans will see the annual benefit limit increase from $275,000 to $280,000.
Revisit the withholding on your W-2. Changes in salary and outside income sources can potentially cause you to under withhold taxes on W-2 if not adjusted.
If you are over age 73 or have inherited an IRA, the start of a new year is the perfect time to review your required minimum distributions (RMDs) and tax withholdings.
- If you inherited an IRA after 2019, you may be subject to the 10-year rule. The IRS released new guidance, effective in 2025, on minimum annual distributions for non-spouse beneficiaries.
- If you are charitably inclined, qualified charitable distributions (QCDs) are a tax efficient way of giving for those over age 70.5. The QCD limit was raised from $105,000 previously to $108,000 in 2025.
Gifting Strategies/Education Planning
In 2025, the annual gift exclusion was raised to $19,000 for individuals and $38,000 for couples, allowing you to remove assets from your taxable estate while providing benefit to someone of your choosing.
- 529 Plans are education saving vehicles that allow you to front load with five years’ worth of the gift exclusion ($95,000 for individuals in 2025). Leftover funds may also be rolled over into a Roth IRA.
- Tuition paid directly to the institution is not included in the $19,000 gift exclusion calculation.
Charitably inclined individuals may benefit from the creation of a Donor Advised Fund (DAF). A DAF allows for the removal of appreciated securities from your estate without a tax event. You can also name the DAF as a beneficiary of your estate or IRA, removing assets from your estate value at passing.
- DAFs also offer the opportunity to reduce low-cost basis, single stock concentration in your portfolio without realizing capital gains.
Estate Planning
Similar to your beneficiary review, it’s important to review your estate plan on an annual basis to ensure any changes in family are incorporated and consistent with current estate and tax law.
- Life events such as marriage/divorce or birth of a child or grandchild may also call for an update to your primary or contingent beneficiaries.
- Ensure assets are titled correctly to avoid probate (if applicable in your state) during an estate administration. For example, ensure all brokerage accounts, bank accounts and real estate assets are appropriately held in a Trust or an LLC.
- Check in on old 401ks for consolidation opportunities or beneficiary updates if you recently changed jobs or retired.
With The Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, the estate exemption would be expected to drastically decrease. While the new administration has signaled an intention to stall the sunset, it is important to align your estate tax eligible assets to achieve the most tax efficient outcome.
- Review the potential for gifting directly to beneficiaries or into irrevocable trusts with your advisor. You can get ahead by creating a plan to execute if or when laws change.
- You can utilize trust structures like Charitable Remainder Trusts (CRTs) to remove assets from your estate now, receive a charitable tax deduction and create an income stream for the remainder of your and/or your beneficiaries’ lifetime.
How WAM Can Help
Keeping your financial plan and goals up to date makes the financial planning process easier to manage and implement. Regular check-ins can help you avoid the stress of making large, last-minute changes to stay on track. At Weatherly, we’re committed to continuously refining plans and portfolios to benefit our clients while staying aligned with updates to tax and estate legislation. By staying informed about changes in the industry and the world, we can offer tailored advice that helps our clients and community adapt and thrive. Let’s work together to ensure your financial plan stays as dynamic as your life.
** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.