Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

The new year is mere weeks away. To make sure taxpayers are informed and prepared, the IRS announced inflation adjustments for many tax provisions in 2025, including marginal tax brackets and retirement account contributions.



<h4 class="wp-block-heading">Retirement plan contribution limits</h4>



The IRS announced higher contribution limits for 401(k), 403(b) and 457 plans next year.



The maximum amount a worker can contribute to those plans is $23,500 in tax year 2025, an increase of $500. The catch-up contribution limit for most plan participants age 50 and older remains unchanged at $7,500.



Beginning in 2025, some older workers can make additional catch-up contributions. As part of the SECURE 2.0 Act, plan participants who are between the ages of 60 and 63 can make catch-up contributions totaling up to $11,250 in tax year 2025.



<a href="https://www.copera.org/retirees/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">Learn more about PERAPlus 401(k)/457 Plans</a>



<h4 class="wp-block-heading">HSA/FSA contribution limits</h4>



The amount of money workers can contribute to medical savings accounts also will increase in 2025.



<ul>
<li>HSA: Individuals enrolled in a high deductible health plan (HDHP) with a health savings account (HSA) will be able to contribute up to $4,300, and those with family coverage will be able to save a maximum of $8,550.</li>



<li>FSA: For workers who don’t have an HDHP with an HSA and instead use a flexible spending account (FSA), the maximum contribution for 2025 is $3,300. For plans that allow unused balances to roll over, the maximum amount that can be rolled over will increase to $660.</li>
</ul>



<h4 class="wp-block-heading">2025 tax rates</h4>



Below are updated marginal tax rates for single taxpayers and married couples filing jointly. Visit <a href="https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025">the IRS website</a> for more tax tables and additional details.



Note that since these changes are for tax year 2025, they will generally apply to tax returns filed in 2026; <a href="https://www.copera.org/pera-on-the-issues/updated-tax-brackets-contribution-limits-other-changes-for-2024">2024 tax rates</a> will apply to returns filed in 2025.



<ul>
<li>37% for incomes over $626,350 ($751,600 for married couples filing jointly)</li>



<li>35% for incomes over $250,525 ($501,050 for married couples filing jointly)</li>



<li>32% for incomes over $197,300 ($394,600 for married couples filing jointly)</li>



<li>24% for incomes over $103,350 ($206,700 for married couples filing jointly)</li>



<li>22% for incomes over $48,475 ($96,950 for married couples filing jointly)</li>



<li>12% for incomes over $11,925 ($23,850 for married couples filing jointly)</li>



<li>10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly)</li>
</ul>



<h4 class="wp-block-heading">Standard deduction</h4>



In addition to updated tax rates, the IRS announced increases to the standard deduction for tax year 2025:



<ul>
<li>Single taxpayers and married couples filing separately: $15,000 ($400 increase)</li>



<li>Heads of household: $22,500 ($600 increase)</li>



<li>Married couples filing jointly: $30,000 ($800 increase)</li>
</ul>







Taxpayers who are 65 or older can take an additional standard deduction, which is also adjusted for inflation. For tax year 2025, that amount is $2,000 for single filers and $1,600 for others.



Visit <a href="https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025" target="_blank" rel="noreferrer noopener">the IRS website</a> for more adjustments to tax provisions in 2025.



<h4 class="wp-block-heading">PERA benefits and taxes</h4>



Colorado PERA benefits are subject to federal income tax, as well as applicable state and local taxes. PERA retirees who would like to update their tax withholding can do so by&nbsp;<a href="https://www.copera.org/member-login-registration" target="_blank" rel="noreferrer noopener">logging in</a>&nbsp;to their secure member account or completing a paper Form W-4P.



Retirees and benefit recipients can expect to receive their 1099-R tax forms for tax year 2024 in January 2025.



Learn more at&nbsp;<a href="https://www.copera.org/taxes-on-benefits" target="_blank" rel="noreferrer noopener">copera.org/taxes-on-benefits</a>.

Updated Tax Brackets, Contribution Limits and More to Know for 2025

The Internal Revenue Service (IRS) announced inflation adjustments for many tax provisions in 2024, including higher contribution limits for various types of accounts and updated tax brackets.



<h4 class="wp-block-heading">Retirement account contribution limits</h4>



The IRS <a href="https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000" target="_blank" rel="noreferrer noopener">increased contribution limits</a> for individual retirement accounts (IRAs), as well as 401(k), 403(b), and most 457 plans.



The maximum amount a worker can contribute to 401(k)/403(b)/457 plans is $23,000 in 2024, an increase of $500. The IRA contribution limit also increased $500 to $7,000. Catch-up contribution limits remain unchanged in 2024.



<h4 class="wp-block-heading">HSA &amp; FSA contribution limits</h4>



The amount workers can contribute to medical savings accounts will also increase in 2024.



Individuals enrolled in a high deductible health plan (HDHP) with a health savings account (HSA) will be able to contribute up to $4,150 and those with family coverage will be able to save a maximum of $8,300.



For workers who don’t have an HDHP with an HSA and instead use a flexible spending account (FSA), the maximum contribution for 2024 is $3,200. For plans that allow unused balances to roll over, the maximum amount that can be rolled over will increase to $640.



<h4 class="wp-block-heading">2024 tax rates</h4>



Below are <a href="https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024" target="_blank" rel="noreferrer noopener">updated marginal tax rates</a> for single taxpayers and married couples filing jointly. See the <a href="https://www.irs.gov/irb/2023-48_IRB#REV-PROC-2023-34" target="_blank" rel="noreferrer noopener">IRS website</a> for more tax tables and additional details. Since these changes will take effect for tax year 2024, they will generally apply to tax returns filed in 2025.



<ul>
<li>10% for incomes of $11,600 or less ($23,200 for married couples filing jointly)</li>



<li>12% for incomes over $11,600 ($23,200 for married couples filing jointly)</li>



<li>22% for incomes over $47,150 ($94,300 for married couples filing jointly)</li>



<li>24% for incomes over $100,525 ($201,050 for married couples filing jointly)</li>



<li>32% for incomes over $191,950 ($383,900 for married couples filing jointly)</li>



<li>35% for incomes over $243,725 ($487,450 for married couples filing jointly)</li>



<li>37% for incomes over $609,350 ($731,200 for married couples filing jointly)</li>
</ul>



In addition to updated tax rates, the IRS announced increases to the standard deduction for tax year 2024:



<ul>
<li>Single taxpayers and married couples filing separately: $14,600 ($750 increase)</li>



<li>Heads of household: $21,900 ($1,100 increase)</li>



<li>Married couples filing jointly: $29,200 ($1,500 increase)</li>
</ul>



Visit the <a href="https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024" target="_blank" rel="noreferrer noopener">IRS website</a> for more adjustments and tax changes for 2024.



<h4 class="wp-block-heading">PERA benefits and taxes</h4>



Colorado PERA benefits are subject to federal income tax, as well as applicable state and local taxes. PERA retirees who would like to update their tax withholding can do so by <a href="https://www.copera.org/member-login-registration" target="_blank" rel="noreferrer noopener">logging in</a> to their secure member account or completing a paper Form W-4P. Learn more information at <a href="https://www.copera.org/taxes-on-benefits" target="_blank" rel="noreferrer noopener">copera.org/taxes-on-benefits</a>.

Updated Tax Brackets, Contribution Limits, Other Changes for 2024

October is National Retirement Security Month, providing a great opportunity as the year winds down to take a look at one’s finances, goals, and plans for retirement.



With recent research showing that many of us <a href="https://www.usatoday.com/story/money/2023/10/12/how-long-does-retirement-last/71074947007/" target="_blank" rel="noreferrer noopener">greatly underestimate how long we’ll live</a>, it’s important to plan ahead and make sure you’re on track to reach your retirement goals.



If you’re a member of the PERA Defined Benefit Plan, you’re already set for lifetime income in retirement. But if you’d like to do more to ensure your retirement security, there are steps you can take.



PERA has been sharing tips throughout October on <a href="https://www.facebook.com/ColoradoPERA" target="_blank" rel="noreferrer noopener" class="broken_link">Facebook</a> and <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a>, and we’re wrapping up National Retirement Security Month with some more helpful information here.



Consider some of the items below if you’re taking stock of your financial health this month:



<ul>
<li>Save additional money in a PERAPlus plan: PERA offers a voluntary <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k) Plan</a> to all members, and some PERA employers also offer the <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 457 Plan</a>. Both plans allow you set aside additional pre-tax dollars (there’s also a Roth option) on top of what you contribute to your PERA Defined Benefit Plan or PERA Defined Contribution Plan account.</li>



<li>Make a savings plan: A recent survey found that a surprising number of Americans <a href="https://content.copera.org/national-retirement-security-month-highlights-importance-of-planning-for-future/" target="_blank" rel="noreferrer noopener">have no savings account at all</a>. Saving money is easier said than done, but making a plan to save even a little bit at a time can make a huge difference (not to mention you can take advantage of historically high rates on savings accounts right now).</li>



<li>Take full advantage of your HSA, if you have one: If you have a high-deductible health plan with a health savings account (HSA), you might not be aware of its retirement-planning benefits. In addition to setting aside pre-tax dollars for health care expenses (one of the biggest expenses in retirement), your HSA balance is available to spend on other needs once you reach age 65. Your HSA is also exempt from required minimum distributions (RMDs).</li>



<li>Don’t forget estate planning: Estate planning isn’t just for the wealthy, and it’s not just for deciding who inherits your assets. Good estate planning can also make sure your loved ones <a href="https://www.kiplinger.com/retirement/overlooked-benefits-of-estate-planning" target="_blank" rel="noreferrer noopener">know what to do if you’re no longer able to care for yourself</a>.</li>



<li>Download the new PERA mobile app: The <a href="https://www.copera.org/pera-mobile-app" target="_blank" rel="noreferrer noopener">PERA app</a> allows members to access important information like account balance, projected monthly benefit, and service credit history, as well as fill out forms (and even apply for retirement) from their mobile phone.</li>
</ul>



Regardless of where our members are in their public service career, we have a lot of helpful resources on PERA benefits available online, including:



<ul>
<li><a href="https://www.copera.org/pera-frequently-asked-questions" target="_blank" rel="noreferrer noopener">Frequently asked questions (FAQs)</a></li>



<li><a href="https://www.copera.org/quick-tip-videos" target="_blank" rel="noreferrer noopener">Quick Tip videos</a></li>



<li><a href="https://www.copera.org/webinars" target="_blank" rel="noreferrer noopener">On-demand and live webinars</a></li>



<li><a href="https://www.copera.org/financial-wellness-library" target="_blank" rel="noreferrer noopener">Financial wellness articles</a></li>
</ul>

National Retirement Security Month Highlights Importance of Planning for Future

<h4 class="wp-block-heading"><a href="https://content.copera.org/news-you-should-know-colorado-senator-part-of-bipartisan-group-crafting-retirement-legislation/" target="_blank" rel="noreferrer noopener">Bipartisan Group Crafting Retirement Security Legislation</a> | Pensions &amp; Investments</h4>



Senator John Hickenlooper of Colorado is part of a bipartisan group of lawmakers who say they’re forming a working group to write legislation that improves retirement security for Americans. The announcement comes as a major retirement bill, dubbed SECURE Act 2.0, works its way through Congress.



<h4 class="wp-block-heading"><a href="https://www.cnbc.com/2022/05/19/you-cant-save-in-hsa-on-medicare-a-bill-to-change-that-has-tradeoffs.html" target="_blank" rel="noreferrer noopener">You Can’t Put Money in a Health Savings Account Once You’re on Medicare. A House Bill to Change That Comes With Tradeoffs</a> | CNBC</h4>



Under current law, retirees enrolled in Medicare cannot contribute to a health savings account (HSAs). A proposed bill would change that, but it would also alter some of the other rules for HSAs. Those changes could include removing the ability to use an HSA to pay Medicare premiums and eliminating penalty-free withdrawals for people aged 65 and older.



<h4 class="wp-block-heading"><a href="https://www.forbes.com/sites/forbesbooksauthors/2022/05/20/the-10-most-common-mistakes-retirees-make-on-their-taxes/?sh=5dbc53e03300" target="_blank" rel="noreferrer noopener">The 10 Most Common Mistakes Retirees Make on Their Taxes</a> | Forbes</h4>



One of the challenges of managing finances in retirement is navigating the various tax implications that take effect when you’re no longer working. A retirement planner outlines some of the common mistakes retirees make on their taxes, and how to avoid them.



<h4 class="wp-block-heading"><a href="https://www.aarp.org/money/investing/info-2022/financial-plan-for-loss-of-spouse.html" target="_blank" rel="noreferrer noopener">The Financial Penalty of Losing Your Spouse</a> | AARP</h4>



Losing a loved one can be a huge shock, but the loss of a spouse can also have serious financial implications. But advance planning and careful consideration can help alleviate some of the headache of dealing with finances amid heartbreak.



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News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: Colorado Senator Part of Bipartisan Group Crafting Retirement Legislation

<h4 class="wp-block-heading"><a href="https://qz.com/2025569/record-us-retirements-may-hinder-economic-recovery/" target="_blank" rel="noreferrer noopener">Americans aren’t just quitting—they are retiring at record rates, too</a> | Quartz</h4>



As this headline states clearly, there’s an increase in workplace exoduses nationwide—both for other jobs, and also for good. The percentage of retired Americans jumped a full percentage point during the pandemic, from 18.5% to 19.5%. In 2020, 5,857 PERA members retired, up about 10% from 2019, when there were 5,335 service retirements.



<h4 class="wp-block-heading"><a href="https://www.denverpost.com/2021/06/16/colorado-health-insurance-state-government-walmart/" target="_blank" rel="noreferrer noopener">Colorado state government, major employers like Walmart look to lower health insurance costs</a> | Denver Post (possible paywall)</h4>



The Colorado Purchasing Alliance is a group of organizations looking to address the rising cost of health care. Next year, some employers will be banding together to negotiate pricing directly with hospitals and other providers. Walmart, Comcast, and the State of Colorado are among the employers in this initiative. (Colorado PERA is member of the Colorado Purchasing Alliance but is not participating in the group purchasing initiative yet.)



<h4 class="wp-block-heading"><a href="https://www.futurity.org/aging-trends-2588122-2/" target="_blank" rel="noreferrer noopener">Report: Positive Trends in Aging, But Not For Everyone</a> | Futurity</h4>



Getting older is getting easier. In the past decade, older populations have seen improvements in physical functioning, vision, hearing, and even lower rates of dementia. Fewer live in nursing homes or assisted living settings. Those who do don’t need as much help. But those are just averages. On the whole, women are the driving force behind these statistical changes while men lag behind. Also, Black and Hispanic Americans haven’t experienced these improvements to the degree that other groups have.



<h4 class="wp-block-heading"><a href="https://www.nerdwallet.com/article/finance/how-to-harness-your-hsas-superpowers" target="_blank" rel="noreferrer noopener">How to Harness Your HSA’s Superpowers</a> | Nerdwallet</h4>



If you have a high deductible health plan (HDHP), you might know that you have access to a health savings account (HSA). At first glance this might seem indistinguishable from a flexible spending account (FSA). But there are some key differences, which might affect your retirement. For example, whereas FSAs require you to spend most of your account balance each year (use it or lose it), you can accumulate tax-free savings in your HSA over the course of many years.



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News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

Tag Archives:

Updated Tax Brackets, Contribution Limits and More to Know for 2025

Updated Tax Brackets, Contribution Limits, Other Changes for 2024

National Retirement Security Month Highlights Importance of Planning for Future

News You Should Know: Colorado Senator Part of Bipartisan Group Crafting Retirement Legislation

News You Should Know: Americans retiring at record rates

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