Each year around this time, the government announces inflation adjustments that impact retirement contributions, Social Security, pensions, Medicare premiums, and more. These changes can be important for both retirees and those still working, as they can significantly impact your budget or financial plan.
Over the past 12 months, the Consumer Price Index (CPI), the most commonly used measure of inflation, has risen by 2.6%. Compared to some recent years with higher inflation, this year’s adjustments may feel less significant. In this article, we’ll explore the changes across three key areas: retirement savings contribution limits, cost-of-living adjustments (COLA) for Social Security and pensions, and updates to income tax brackets.
Retirement Savings
| Account/Plan Type | 2024 Limit | 2025 Limit | 2024 Catchup | 2025 Catchup | Age 60-63 Catchup |
| 401(k)/TSP | $23,000 | $23,500 | $7,500 | $7,500 | $11,250 |
| IRA | $7,000 | $7,000 | $1,000 | $1,000 | N/A |
| HSA (Family) | $8,300 | $8,550 | $1,000 | $1,000 | N/A |
| HSA (Single) | $4,150 | $4,300 | $1,000 | $1,000 | N/A |
401(k) & TSP
- For 2025, there will be a slight increase to the regular contribution limit, increasing from $23,000 to $23,500.
- For those over the age of 50, catch-up contributions will remain the same at $7,500.
- The most notable change is for people who are turning 60, 61, 62, or 63 in the calendar year 2025. Instead of a $7,500 catch-up contribution, they will instead be allowed to contribute the greater of $10,000 or 150-percent of the regular catchup amount in addition to the regular deferral limit. For 2025, this amount will be $11,250. This change is optional for employers, but the TSP has confirmed that it will be adopted for federal employees.
IRA
- There are no changes to the regular or catch-up contribution limits for IRAs.
- The special catch-up contribution limit for those between ages 60-63 that applies to 401(k) plans and TSP does not apply to IRAs.
HSA
- For those with covered dependents, annual contribution limits have increased by $250, from $8,300 to $8,550.
- For those with single coverage, regular contribution limits have increased by $150 from $4,150 to $4,300.
- There is no change to catch-up contribution limits for HSAs.
Retirement Income
Social Security & Medicare
- The Social Security Administration announced that benefits will increase by 2.5 percent in 2025.
- Those enrolled in Medicare Part B will see an increase in minimum Part B premiums from $174.70/month in 2024 to $185/month in 2025.
CSRS
- Federal employees who retired under the CSRS system receive the same cost of living adjustment as Social Security and will get the full 2.5%.
FERS
- Cost of living adjustments for FERS annuitants are based on the Social Security increase and are calculated as follows:
- COLA is over 3%: FERS annuitants receive 1% less than the full COLA.
- COLA is between 2% and 3%: FERS annuitants receive a 2% COLA.
- COLA is less than 2%: FERS annuitants receive the full COLA.
- As a result of the 2.5 percent adjustment to Social Security, FERS annuitants will see a 2-percent increase in their pensions for 2025.
Income Tax Brackets
After the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, a majority of Americans take the standard deduction on their taxes as opposed to itemizing. The standard deduction amount will be increasing for all filers in 2025. Marginal tax rates will remain the same in 2025, but the income subject to each bracket is increased for inflation.
| Filing Status | 2024 | 2025 | |
| Single | $14,600 | $15,000 | +$400 |
| Married Filing Jointly | $29,200 | $30,000 | +$800 |
| Head of Household | $21,900 | $22,500 | +$600 |
The TCJA is scheduled to expire at the end of 2025. This means federal income tax brackets could go back to what they originally were prior to this law being enacted. If Congress does not act to postpone or remove this change, taxpayers in all but the lowest bracket will see their marginal rates increase. See the table below for the potential changes.
| Federal Tax Brackets Under TCJA | Federal Tax Brackets if TCJA Expires | |
| 10% | 10% | |
| 12% | 15% | |
| 22% | 25% | +3% |
| 24% | 28% | +4% |
| 32% | 33% | +1% |
| 35% | 35% | |
| 37% | 39.6% | +2.6% |
Update for 2026
Starting in 2026, workers aged 50 and older who earned $145,000 or more in the previous year will be required to funnel catch-up contributions to a Roth 401(k) plan. This provision of the SECURE 2.0 Act was originally scheduled to take effect in 2024, but the IRS postponed implementation until 2026 after plan providers and employers — particularly those who don’t yet offer a Roth 401(k) — said they needed more time to prepare.
This list highlights some of the most impactful changes coming down the pipe but is not exhaustive. If you have questions about these updates or want to explore how the 2025 and 2026 changes might affect your federal benefits or financial plan, our team of experts at Dugan Brown is here to help you navigate these changes, and to ensure your retirement strategy remains on track.
