My youngest, Jesse, is now twelve, and we took him shoe shopping. It turned out that he was now a size eight, wearing size six and halves around. Poor kid probably had sore feet. They grow so fast at that age.
Jesse is also perfecting the art of making brownies (from a box). He has found the key is to use a round, metal cake pan for it to cook evenly and have the proper depth. I am more than happy to taste and judge his creations.
The dogs are not enjoying this weather (just like us humans). We must drag them out of the house to go to the bathroom. It's 8 degrees in Pittsburgh. I have no idea how I lived there for thirty-five years.
Below, Penny is not happy about moving from her cozy space.
With the new administration in office, let's look at some law changes, financial policy updates for 2025, and new developments that could impact your wallet. For retirees and soon-to-be retirees, every tweak matters.
Tax Cuts and Jobs Act Extensions
Remember the Tax Cuts and Jobs Act from 2017? Probably not. It lowered tax brackets, increased the standard deduction, and doubled the child tax credit. The bad news: these provisions expire at the end of 2025 unless Congress takes action. The good news? These tax cuts will almost certainly be permanent now that the new administration calls the shots.
Here’s what it means in dollars:
Under current law, a single filer making $100,000 would fall into the 24% tax bracket. If the TCJA isn’t extended, they’d jump into the 28% bracket—meaning roughly $4,000 more in taxes.
If you’re married filing jointly and your household income is $200,000, you’re in the 22% bracket now, but without the extension, you’d pay 25%, or about $6,000 extra annually.
Standard Deduction Bump:
If you’re over 65 and filing jointly, the additional deduction rises by $3,200 per couple.
Let’s do some math: Say you and your spouse make $80,000 annually. With the extra deduction, your taxable income drops to $76,800, saving you about $704 in taxes if you’re in the 22% bracket. For single filers, the increase is half that.
Medicare Part D Cap: A Lifesaver for Drug Costs
Starting in 2025, Medicare Part D will cap annual out-of-pocket prescription drug costs at $2,000.
Here’s a real-world example:
If you spend $5,000 annually on medications, you’ll save $3,000 in 2025. This all has to do with Medicare having new options in negotiating with big bad pharmaceutical companies.
Social Security COLA
Social Security checks are getting a 2.5% cost-of-living adjustment (COLA) in 2025. It’s not exactly a lottery win.
Retirement Contribution Limits
The IRS is encouraging us to squirrel away more. A lot of people need the encouragement. Trust me. I’ve noticed that individuals born in the 1960s tend to have poorer saving habits compared to earlier baby boomers. If you’re 50 or older, here’s what you can save in 2025:
401(k), 403(b), or 457 plans: You can contribute up to $30,000 if you are over 50. You can contribute $33,750 if you are 60-63. If your employer adds money, it is above and beyond these limits.
For example, if you are 58 years old, max out your 401(k), and are in the 24% tax bracket, you’ll save $7,440 in taxes.
Possible Elimination of Social Security Taxes
Lawmakers are flirting with the idea of removing federal taxes on Social Security benefits. Currently, up to 85% of your benefits can be taxable if your income is high enough.
Here’s how it works today:
If you’re married and your combined income is over $44,000, you’ll pay taxes on 85% of your benefits. If your benefits are $30,000, that’s $25,500 taxable income, which could cost you $5,610 in taxes in the 22% bracket.
Don’t get too excited, though. This policy would face stiff opposition.
There’s also talk of limiting how much you can convert from a traditional IRA to a Roth IRA annually. If you’ve been using this strategy, keep an eye on future limits.
Many of these points seem positive, so you might want to feel optimistic about future tax and monetary policies.
Be Blessed,
Dave