At Legacy Private Trust Company, we understand that navigating changes in retirement planning is essential for securing and preserving generational wealth. As we look toward 2025, new regulations affecting 401(k) and IRA plans present opportunities and considerations for individuals and families focused on legacy building and long-term financial security. Below, we outline the most significant updates and how they may impact sophisticated retirement strategies.
Enhanced Catch-Up Contributions for Pre-Retirees
For individuals aged 60 to 63, the increased limits on catch-up contributions—up to $10,000 annually for 401(k) plans—create an opportunity to accelerate retirement savings during high-income years. This can be particularly advantageous for those seeking to maximize contributions in alignment with estate and wealth transfer strategies.
At Legacy, we will work with you to determine if increasing contributions aligns with your financial and legacy goals, ensuring this change integrates seamlessly with your broader tax and investment considerations.
Mandatory Roth Contributions for High-Income Earners
Starting in 2025, high-income earners (defined as those with wages exceeding $145,000) will be required to allocate catch-up contributions to Roth accounts. This shift to after-tax savings can provide significant long-term benefits, including tax-free withdrawals during retirement—a potential advantage for those with large taxable estates.
Our team is skilled in navigating the tax complexities of such changes, helping you create a strategy that optimizes these advantages. Whether you are exploring options to mitigate estate taxes or enhance retirement liquidity, we will ensure your plan is structured for maximum tax efficiency.
Automatic Enrollment and Its Strategic Implications
New 401(k) plans will mandate automatic enrollment at a contribution rate beginning at 3 percent, with annual increases up to 10 percent. While this change primarily affects employers, it also reflects a broader shift toward encouraging systematic savings. Business owners or family offices managing multiple entities may need to revisit existing plan structures in light of these updates.
Broader Access for Part-Time Employees
The eligibility threshold for part-time employees to participate in 401(k) plans will be reduced from three years of service to two. Business owners will need to reexamine their retirement plan designs to address this regulatory change.
For individuals who own businesses, this adjustment is an opportunity to ensure that current retirement plan offerings align with both regulatory standards and broader organizational objectives. Our team provides tailored strategies to optimize retirement plan structures, ensuring they remain financially beneficial and operationally sound.
Higher Contribution Limits for SIMPLE IRAs
Employees and employers using SIMPLE IRAs will benefit from increased contribution limits, making these plans more competitive for small businesses. For clients who own closely held businesses, these changes offer new opportunities to enhance tax-advantaged savings.
Our experts collaborate with small business owners to develop strategies that maximize the advantages of SIMPLE IRAs while ensuring alignment with long-term wealth preservation and growth objectives.
Why Proactive Planning Matters
These updates reflect the ever-evolving nature of retirement planning and underscore the importance of staying ahead of regulatory changes. Remaining proactive is essential to making the most of these updates and ensuring your financial strategies remain effective. The 2025 changes are not merely administrative; they represent valuable opportunities to refine your approach and protect your legacy.
At Legacy Private Trust Company, we provide highly customized guidance to ensure these updates align with your broader wealth management objectives. Whether you are addressing complex tax considerations, enhancing employee retirement benefits, or refining your personal retirement strategy, our fiduciary team is prepared to support you every step of the way.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
