As the 2025 retirement planning window approaches, financial advisors are advising baby boomers to update their savings, tax, and withdrawal strategies. Key shifts include adjusting Social Security timing, increasing 401(k) contributions, and evaluating long-term care coverage.
- Social Security benefits increase by up to 8% annually for each year delayed past full retirement age.
- 401(k) contribution limits rise to $23,000 for under-50s and $30,500 for those 50+ in 2025.
- Average annual nursing home cost exceeds $108,000, with projected lifetime care costs over $280,000.
- Strategic Roth conversions during lower-income years can lower future tax liabilities.
- Failure to maximize employer 401(k) match represents a loss of potential retirement income.
- Retirement age averages 66.4 years, increasing the need for longer planning horizons.
Financial advisors are urging baby boomers nearing retirement to implement four critical financial adjustments by early 2025 to strengthen their post-work stability. With the average retirement age now at 66.4, many individuals are facing rising healthcare costs and longer life expectancies, making proactive planning essential. A strategic review of retirement accounts, income sources, and tax efficiency is now imperative for those born between 1946 and 1964. The first priority is optimizing Social Security claiming age. Delaying benefits until age 70 can increase monthly payments by up to 8% annually compared to claiming at full retirement age, which translates to an additional $1,200 to $1,800 per month for individuals with average lifetime earnings. For the 72 million baby boomers, this could mean tens of thousands in extra income over a 20-year retirement. Second, advisors recommend boosting 401(k) contributions to $23,000 annually for those under 50 and $30,500 for those 50 and older in 2025. These limits reflect cost-of-living adjustments and are designed to maintain purchasing power amid inflation. For individuals with employer matching programs, failing to contribute at the match level equates to leaving free money on the table. Third, many boomers must address long-term care needs. With the average cost of a private nursing home now exceeding $108,000 per year, standalone long-term care insurance policies are increasingly recommended. A 65-year-old couple can expect to spend over $280,000 on care over a 15-year retirement period, underscoring the need for dedicated planning. Finally, tax-efficient withdrawal sequences from retirement accounts are gaining emphasis. Moving funds from taxable accounts to Roth IRAs in lower-income years can reduce future tax burdens, particularly given the potential for higher tax brackets in retirement.