Money Guy Show: Episode Summary
Title: 2025 Tax Changes You Can’t Afford to Ignore!
Hosts: Brian Preston and Bo Hanson
Release Date: November 18, 2024

Introduction to 2025 Tax Changes

In this episode, hosts Brian Preston and Bo Hanson delve into the significant tax changes slated for 2025, emphasizing the importance of staying informed to optimize one's financial strategies. Bo kicks off the discussion by highlighting the inevitability of tax rule changes and their impact on personal finances.

Bo Hanson [00:11]: "One of the things we know about taxes is that they change and the rules change and the things that we need to know about to positively impact our tax situation also change."

Brian shares his initial frustrations with the timing of tax updates but acknowledges the necessity of understanding these changes to avoid surprises in retirement contributions.

Brian Preston [00:32]: "There will not be any mystery to what's coming your way in 2025."

Employer-Sponsored Retirement Plans

The hosts first address updates to employer-sponsored retirement plans, such as 401(k)s, 403(b)s, 457s, and Thrift Savings Plans. Bo outlines the adjustments to salary deferral limits and total contribution caps due to inflation adjustments and legislative changes under Secure Act 2.0.

• Salary Deferral Limits:
  • 2024: $23,000
  • 2025: Increased to $23,500

Bo Hanson [02:20]: "The IRS has now released these new inflation-adjusted contribution amounts."

Brian emphasizes the necessity of updating deferral amounts with HR to prevent missing out on maximizing contributions.

Brian Preston [02:43]: "Don't have that surprise when you get your November December paycheck of next year and you go, man, I didn't max out my 401k. I missed it."

• Total Contribution Limits (Section 415):
  • 2024: $69,000
  • 2025: Increased to $70,000

Bo introduces the concept of "super catch-up" contributions for individuals nearing retirement age, allowing those turning 60-63 in 2025 to contribute an additional 50% on top of the standard catch-up amount.

Bo Hanson [04:33]: "If you happen to be turning one of those ages in 2025, you can actually do a catch-up contribution equal to $11,250."

IRAs and Other Savings Vehicles

The discussion shifts to Individual Retirement Accounts (IRAs), where Bo notes that contribution limits for Traditional and Roth IRAs remain unchanged in 2025.

• Contribution Limits:
  • Under 50: $7,000 (unchanged)
  • 50 and Over (Catch-Up): $1,000 (unchanged)

Bo Hanson [07:18]: "Traditional IRAs and Roth IRAs... contribution limits are not changing."

Brian highlights the slight increase in SEP IRA limits, aligning them with the updated Section 415 limits.

Brian Preston [07:38]: "SEP IRAs... were $69,000 in 2024. They're now $70,000 going into 2025."

Additionally, Bo touches upon SIMPLE IRAs, which see a modest increase in salary deferrals and introduce "super catch-up" contributions for eligible individuals.

Health Savings Accounts (HSAs) and 529 Plans

Bo expresses disappointment that IRA limits remain static but pivots to positive changes in Health Savings Accounts (HSAs). The 2025 HSA contribution limits rise from $4,150 (individual) and $8,300 (family) to $4,300 and $8,550, respectively.

Bo Hanson [10:23]: "The new limits are $4,300 for individuals and $8,550 for families."

Brian expands on the benefits of incremental increases in tax-advantaged accounts, noting the cumulative impact over time.

Brian Preston [12:18]: "Even the koozie, the $1 for a 2021 year old has the potential to become 88."

Regarding 529 plans, the annual gift exclusion amounts slightly rise from $18,000 to $19,000 in 2025. However, these do not benefit from the stacking provision available in 529 accounts.

Bo Hanson [10:23]: "If you were maxing out at the 4,150 or 8,300, you need to make sure that you increase it for January."

Behavioral Finance: Saving Rates and Financial Order of Operations

Bo and Brian discuss the significance of maintaining disciplined saving habits, even with seemingly minor increments. Bo references their "Financial Order of Operations," emphasizing the importance of consistent saving and investing.

Bo Hanson [11:17]: "If you can do that next year and the year after, it can be the most powerful part of your entire financial journey."

Brian reinforces the idea that small, consistent actions compound significantly over time, likening it to delayed gratification leading to substantial future rewards.

Brian Preston [12:18]: "That 1% which might seem like absolutely nothing... can actually have significant impacting your future self."

Listener Questions

The latter part of the episode features listener questions, providing practical applications of the discussed tax changes and financial strategies.

1. Jonathan V.: Roth vs. Traditional Accounts and Savings Rate

Question:
"Why does the goal of 20 to 25% invested for retirement not change based on traditional versus Roth accounts? Having a million in Roth could be very different from a million in traditional accounts."

Bo's Response [15:32]:
Bo explains that while Roth and Traditional accounts differ in tax treatment—Roth being post-tax and Traditional being pre-tax—the overall savings goal of 20-25% remains to establish robust saving behaviors. He advises focusing on consistent saving first before fine-tuning account types based on individual financial journeys.

Bo Hanson [15:32]: "If you can do that, odds are you're going to set yourself up for future financial success."

Brian's Response [17:27]:
Brian emphasizes the priority of behavioral habits over the complexities of tax strategies. He outlines their "Financial Order of Operations," stressing that saving and investing consistently sets the foundation for later, more personalized financial decisions.

Brian Preston [17:27]: "We focus on the behavioral side of things first. And then we're going to get into the execution or the fine-tuning later."

2. Craig W.: Paying Off Family Debt at 0% Interest

Question:
"Do you believe in paying off a $24k family debt at 0% interest as quickly as possible? We can pay what we want each month but feel short-term struggle for a quicker way to freedom is the way. What are your thoughts?"

Bo's Response [22:46]:
Bo addresses the delicate nature of family loans, advocating for clear communication and setting mutual expectations upfront. He advises against exploiting such opportunities by neglecting repayment, emphasizing responsibility and the preservation of family relationships.

Bo Hanson [22:46]: "I would want for you to find a reasonable method and mechanism to pay it off over a timeline that makes sense for you as well as the lender."

Brian's Response [25:00]:
Brian draws from his personal experiences, highlighting the importance of defining the loan terms clearly to avoid misunderstandings. He suggests treating significant loans with formal plans to ensure accountability and maintain familial harmony.

Brian Preston [25:00]: "Set yourself up a plan of success, know what they're anticipating and expecting, and then treat this like, you know, a step eight or nine type thing where you are going to prepay it."

Bo's Additional Insights [28:14]:
Bo offers unsolicited advice, recommending that lenders approach family loans with the assumption that the money might never be repaid to safeguard relationships. He underscores the necessity of ensuring that loaning money does not compromise one's own financial stability.

Bo Hanson [28:14]: "Always assume you're never going to get that money back... be mindful if this loan originated out of a place of need."

Conclusion and Additional Resources

Bo directs listeners to additional resources, including their 2025 tax guide and upcoming articles that provide deeper insights into the tax changes.

Bo Hanson [13:05]: "You can find 2025 tax brackets, standard deductions, and more in our 2025 tax guide."

Brian reiterates their commitment to delivering both behavioral finance tips and detailed tax policy updates, ensuring listeners are well-equipped to navigate the evolving financial landscape.

Brian Preston [13:42]: "We're going to keep you on the cutting edge of knowing what you need to do with your personal finances."

The episode concludes with a lighthearted exchange about promotional items, reinforcing the show's personable and engaging atmosphere.

Key Takeaways

1. Stay Updated: Tax laws and contribution limits change annually. It's crucial to adjust financial plans accordingly to maximize benefits.
2. Maximize Contributions: Take advantage of increased limits in retirement accounts and HSAs to enhance tax-advantaged savings.
3. Behavior Matters: Consistent saving habits (20-25% of income) are foundational for long-term financial success, regardless of account types.
4. Clear Communication in Loans: When dealing with family loans, establish clear terms and expectations to maintain healthy relationships.
5. Utilize Resources: Leverage the Money Guy Show's guides and articles for detailed strategies and updates on financial planning.

For more detailed information and resources mentioned in this episode, visit moneyguy.com/resources and subscribe to stay informed on the latest financial strategies and tax changes.