IN THIS ISSUE

SOCIAL SECURITY COLA FOR 2025

COMING ATTRACTION: SUPERSIZE

401(k) CONTRIBUTIONS

FUTURE TAXES?

ARTICLES OF INTEREST

Those who have been caregivers become familiar with the needs of the aged, and they know caregiving can be time intensive. Should one not have family to rely upon, concerns may grow about who is going to fulfill that role of caregiver for them. However, as the number of people aging alone, Solo Agers, has grown substantially, so has the industry to support them.

It is not just that there are more older people today due to a demographic shift, but also that more people are aging alone in America than ever before. According to this analysis of U.S. Census Bureau data from KFF Health News, about 28% of people aged 65 and older live by themselves, compared with only 1 in 10 in the 1950s. That means the percentage of people living alone has nearly tripled, and the overall number of older people that percentage applies to has increased considerably as well.

According to an Article from AARP, No Spouse, Partner, or Kids? Solo Agers Don't Need to Go It Alone, there are some steps that any of those aging alone should try to accomplish. Some of the steps may be obvious advice for everyone, such as eating healthy and staying fit through exercise, but others are less obvious, such as embracing technology to stay connected to other people or adjusting your environment to suit the future you.

It's particularly difficult to pay for solutions for problems that don't exist yet, but adding grab bars for stability to a home, or installing a walk-in tub, or moving to a condo that's all on a single level may head off a fall that would create substantial expense alongside mobility issues later on. 

The AARP article mentioned long-term care insurance, which can be one extremely important step in maintaining financial independence and dignity as one ages. According to SeniorLiving.org nursing home costs exceed $100,000 a year and are projected to rise. Long-term care terms can be a bit confusing too. A financial professional can help work through the ins and outs, so the coverage and cost make sense within an entire retirement plan.

Aside from considering what makes economic sense for you, there is more at stake than just making sure there is a way to settle the bills. The most important consideration is who can be trusted and will step in in the case of incapacity or be able to help facilitate the financial management of your assets to ensure stability as you age. A living trust can designate how financial management is handled, and having someone ready to step in should a medical setback occur can make a big difference. That is where a trust officer comes into the picture. As trust officers we must abide by fiduciary rules, which means there are strong levels of government oversight to ensure that we are always acting in our client's best interest. 

Another consideration is a care management agency for themselves. This is a company that understands options and services related to aging, such as food, housing, rehabilitation, and legal issues. By choosing a care agency, you can be more confident that there will be someone stepping in immediately in case of need, but as someone aging alone, you might be worried that there is no one to make sure that care agency is doing their job properly. This is where Garden State Trust Company can help because we understand this problem well, and provide services specifically designed to address this issue. 

We work in conjunction with care management agencies and others on behalf of clients with our Lifecare Services. This allows us to act as the concierge to many additional services to enhance our client's aging experience such as:

• Arranging for Long-Term Care Insurance when appropriate
• Arranging for Medical Reimbursement
• Arranging and monitoring In-Home Care 
• Arranging for Independent or Assisted Living Alternatives
• Arranging and help with the sale of a home when moving into an Independent or Assisted Living alternative

Lastly for Solo-Agers, adding hobbies, taking classes, or attending events at community or senior centers can be difficult but rewarding, and oftentimes create the opportunity to meet new friends and create new social support. 

At Garden State Trust Company, we specialize in services to help our clients achieve their personal financial goals. In an environment where more are aging alone, we have more services geared to helping Solo Agers. We would be pleased to share more information so please contact us if you are interested in learning more about our services and how we can help. Check out our convenient locations at www.gstrustco.com.

MONTHLY QUESTION & ANSWER

Q. What is happening with the federal estate and gift tax?

A. The amounts exempt from federal estate and gift taxes goes up again in 2025, to account for inflation. The gift tax annual exclusion rises from $18,000 to $19,000. This is that amount that may be given to anyone without the need to file a federal gift tax return. There is no limit to the number of annual exclusion gifts that may be made in a year, but the exclusion expires every year. Use it or lose it.

The amount exempt from federal estate tax will be $13.99 million for those who die in 2025. Married couples each have an exempt amount, so together they can shelter $27.98 million from federal estate tax if they both die next year. The exemption may also be used for transfers by gift that exceed the annual exclusion amount.

That exemption amount will excuse the vast majority of 2025 estates from worrying about the federal estate tax. Two important caveats apply, however. Those states that still have death taxes (the term includes estate taxes and inheritance taxes; some states have both) typically impose them at much lower wealth levels. Second, under current law the amount exempt from federal estate tax is scheduled to fall roughly in half in 2026.

It is much too soon to stop worrying about death taxes.

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HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT?

For general informational purposes only. This information does not constitute legal advice.

In two of our Informational Articles, Social Security COLA for 2025 and Coming Attraction: Supersize Your 401(k) Contributions, read about changes next year to cost of living adjustments for those of you receiving social security benefits and age-based 401(k) contribution limits for 2025 after inflation is taken into account.



Veterans Day was observed a few days ago on Monday, November 11th. On Veterans Day we pay tribute to the courage, sacrifice, and patriotism of all veterans, living or deceased, who have defended our nation. We must remember those heroes who have selflessly put their lives on the line to protect our freedoms.

In the same spirit of gratitude and with Thanksgiving approaching, we want to give special thanks to all our clients, colleagues, family, and friends. We extend to all of you and your loved ones our best wishes for a warm and enjoyable Thanksgiving Day. 

Sincerely,

The Social Security Administration has announced a 2.5% benefit increase for 2025, based upon inflation for the twelve months ending September 30, 2024. As inflation has subsided, so has the rate of benefit increases--the COLA was 3.2% for 2024. For the average retiree, the increase will come to about $50 per month. 

With the increase in average wages comes an increase in the wage base for those who are still working. It goes from $168,600 in 2024 to $176,100 in 2025.

Roughly 68 million Social Security beneficiaries will receive the increased benefit. The Social Security Administration did not project the total value of the COLA expense for 2025. A rough calculation would be $40.8 billion (68 million recipients x $50/month x 12 months). The increased expense will be offset by the additional 15.3% in Social Security taxes (employee plus employer share) on the $7,500 increase in the wage base (that comes to $1,147.50 in tax revenue per affected taxpayer). 

Everyone has the right to claim a reduced retirement benefit at age 62, while the date for claiming full benefits varies with the year of birth. Full retirement age was originally age 65, but has been slowly raised over the years. The table below shows how the higher ages are phased in.

Source: Social Security Administration

Social Security benefits are intended for those who are retired. Those who keep working after beginning their benefits face the possibility of benefit reductions. One dollar of benefits will be withheld for every $2 of earned income above $1,950 per month ($23,400 per year). Note that this penalty only applies to earned income; dividends, interest income, and capital gains are not taken into account. A much higher limit applies in the year in which the retiree achieves full retirement age. In the case the exemption comes to $62,160 for the year, and one dollar of benefit is withheld for every $3 over the limit.

Those who have a "my Social Security account" with the Social Security Administration may view their specific COLA increase online. Otherwise, everyone will receive a notice by mail of the projected change to their Social Security benefits for 2025.

(November 2024)

© 2024 M.A. Co. All rights reserved.

For those who failed to save for their retirement early in their careers, the tax code has long permitted age-based "catch-up" contributions to IRAs and 401(k). The SECURE Act 2.0 established an even bigger 401(k) catch-up for those who are 60, 61, 62, and 63, a bonus contribution of $3,750. The change takes effect in 2025.

The table below shows the age-based 401(k) contribution limits for 2025 after inflation is taken into account.

2025 401(k) contribution limits

Source: IR 2024-285

The supersized limit does not apply to IRAs. The 2025 limit for deductible IRA contributions will be $7,000, with a catch-up allowance of $1,000 for taxpayers 50 and older. The IRA catch-up will be indexed for inflation in the future.

Although the added incentive to boost savings just before retirement begins is welcome, it's not something to rely upon. Putting more money into a 401(k) plan early in one's career, starting in one's 30s or ever 40s, will do far more for retirement security than larger contributions late in the earning years. Earlier contributions have the benefit of many more years of compounding growth.

(November 2024)

© 2024 M.A. Co. All rights reserved.

The Heritage Foundation's Project 2025 received some attention in the Presidential campaign. President-elect Trump never endorsed the project during his campaign, and in fact many of his suggestions--for example, to eliminate income taxes on tips and overtime hours--run counter to the Project's philosophy. Still, it may provide clues to the direction of changes that the Republicans may favor next year. 

What does Project 2025 advocate for taxes? Some highlights:

• Estate and gift taxes. The 2017 doubling of the amount exempt from transfer taxes should be made permanent, and the tax rate lowered to 20%.
• Individual income taxes. There should be only two tax rates, 15% and 30%. The top tax rate should begin at the Social Security wage base, so that the tax on wage income is nearly flat above the standard deduction.
• Corporate taxes. The corporate income tax rate should be reduced to 18%.
• Capital gains. Qualified dividends and realized long-term capital gains should be taxed at 15%.
• SALT. The deduction for state and local taxes should be repealed entirely. (During the campaign, President-elect Trump advocated removing entirely the $10,000 cap, going in the opposite direction.)
• Repealed taxes. The Net Investment Income Tax should be repealed, together with the new taxes added to the Tax Code by the Inflation Reduction Act (such as the book minimum tax, the stock buyback excise tax, and the coal excise tax).
• Supermajorities for raising taxes. A three-fifths majority in the House and Senate should be required for increasing individual or corporate tax rates. Earlier contributions have the benefit of many more years of compounding growth.

The problem that Congress will have to grapple with before extending the 2017 tax reforms, or creating new tax cuts, is that deficit spending is already at historic levels, and arguably is not sustainable, especially when interest rates are above average.

(November 2024)

© 2024 M.A. Co. All rights reserved.

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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2024. All rights reserved.