These 3 Changes Are Coming to IRAs in 2025

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If you're saving and investing for retirement, it's important to check once a year to see if there are any new rules or changes coming to IRAs. The IRS occasionally makes changes and updates, such as raising contribution limits or updating the requirements for withdrawing money from IRAs.

Knowing the latest rules for traditional and Roth IRAs can help you maximize your tax advantages, save more money for retirement, and avoid unexpected tax bills.

Here are a few big changes coming to IRAs in 2025.

1. New 10-year rule for inherited IRAs

During your working years of saving and investing for retirement, it's important to keep putting more money into your 40(k), traditional IRA, or Roth IRA. But when you reach retirement age, you need to start thinking about taking money out of your IRA, instead of putting money in.

And taking money out of your IRA can be complicated. That's because traditional IRAs have complex rules for required minimum distributions (RMDs) that, for most people, start at age 73.

The rules for required minimum distributions (RMDs) are even more complex for people who inherit a traditional IRA or Roth IRA. If you have a loved one who dies, and has designated you as a beneficiary of their IRA, you need to be aware of new rules in 2025 for required minimum distributions (RMDs).

Starting in 2025, most non-spouse beneficiaries of inherited IRAs will have to follow a new "10-year rule" for required minimum distributions (RMDs). The exact details will depend on a few factors, but in general, if you have inherited an IRA from someone other than your spouse, you should plan on having to withdraw all the assets from the account within 10 years of the original account owner's death.

And RMDs are taxed as ordinary income in the year that they are withdrawn -- so for someone who inherits an IRA, being required to withdraw money from the account can boost your taxable income (and increase your tax bill) significantly.

Whether you inherit an IRA or are ready to start life in retirement with income from your own IRA, the rules for required minimum distributions (RMDs) are complicated. If you don't take enough money out of your traditional IRA, 401(k), or other qualified retirement account on the right schedule or in the right amounts, you could get hit with extra taxes. This is especially important for people who inherit an IRA and might not be ready for the tax consequences.

Talk with a professional tax advisor or attorney to understand your options for how to withdraw money from your inherited IRA while avoiding a bad surprise at tax time.

2. Bigger catch-up contributions for people aged 60-63

People who are aged 50 and over can put extra money into IRAs each year, beyond the usual contribution limit. These are called "catch-up contributions," and they're a great way to accelerate your retirement investments. But starting in 2025, people who are age 60-63 can make extra catch-up contributions -- the total limit for IRA contributions for this age group is $10,000 for 2025 (including traditional and Roth IRAs, if you qualify).

3. New IRA contribution limits for 2025 (possibly)

Each year, the IRS announces the new IRA contribution limits for the next tax year. As of Sept. 13, 2024, the 2025 IRA contribution limit hasn't been announced yet by the IRS. But it's possible that there could be a higher IRA contribution limit for 2025.

As of 2024, you are allowed to contribute up to $7,000 to traditional or Roth IRAs, with an extra $1,000 catch-up contribution for people age 50 and over. It's possible that the new IRA contribution limit for 2025 could stay the same ($7,000), or could be higher -- but we don't know the exact amount yet.

Bottom line

The biggest change to IRAs in 2025 is related to inherited IRAs and the 10-year rule for withdrawals. Anyone who has inherited an IRA from a loved one should talk to a professional tax advisor, like an accountant or estate planning attorney, to make sure you understand the rules for how to take required minimum distributions (RMDs).

Many inherited IRAs will need to be totally emptied within 10 years of the original account owner's death, and you might need to make a plan for how much to withdraw each year in order to avoid tax penalties.

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