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IRA and Retirement Plan Limits for 2025

IRA and Retirement Plan Limits for 2025

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    Many IRA and retirement plan limits are indexed for inflation each year. While some of the limits remain unchanged for 2025, other key numbers have increased.

    IRA contribution limits

    The maximum amount you can contribute to a traditional IRA or a Roth IRA in 2025 remains $7,000 (or 100% of your earned income, if less). The maximum catch-up contribution for those age 50 or older remains $1,000. You can contribute to both a traditional IRA and a Roth IRA in 2025, but your total contributions cannot exceed these annual limits.

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Income limits for deducting traditional IRA contributions

If you (or if you’re married, both you and your spouse) are not covered by an employer retirement plan, your contributions to a traditional IRA are generally fully tax deductible. If you’re married, filing jointly, and you’re not covered by an employer plan but your spouse is, your deduction is limited if your modified adjusted gross income (MAGI) is between $236,000 and $246,000, and eliminated if your MAGI is $246,000 or more.

If your 2025 federal income tax filing status is: Your IRA deduction is
limited if your MAGI is
between:
Your deduction is eliminated
if your MAGI is:
Single or head of household $79,000 and $89,000 $89,000 or more
Married filing jointly or qualifying
widow(er)
$126,000 and $146,000
(combined)
$146,000 or more (combined)
Married filing separately $0 and $10,000 $10,000 or more

If your filing status is single or head of household, you can fully deduct your IRA contribution up to $7,000 ($8,000 if you are age 50 or older) in 2025 if your MAGI is $79,000 or less. If you’re married and filing a joint return, you can fully deduct up to $7,000 ($8,000 if you are age 50 or older) if your MAGI is $126,000 or less.


Income limits for contributing to a Roth IRA

The income limits for determining how much you can contribute to a Roth IRA have also increased from 2024.

If your 2025 federal income tax
filing status is:

Your Roth IRA contribution is
limited if your MAGI is:
You cannot contribute to a Roth
IRA if your MAGI is:
Single or head of household More than $150,000 but less than
$165,000
$165,000 or more
Married filing jointly or qualifying
widow(er)
More than $236,000 but less than
$246,000 (combined)
$246,000 or more (combined)
Married filing separately More than $0 but less than
$10,000
$10,000 or more

If your filing status is single or head of household, you can contribute the full $7,000 ($8,000 if you are age 50 or older) to a Roth IRA if your MAGI is $150,000 or less. And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $236,000 or less. Again, contributions can’t exceed 100% of your earned income.


Employer retirement plan limits

The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan is $23,500 in 2025, increased from 2024. This limit also applies to 403(b) and 457(b) plans, as well as the Federal Thrift Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $7,500 to these plans in 2025. [Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.] The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) is $16,500 in 2025, and the catch-up limit for those age 50 or older remains $3,500.

Plan type: Annual dollar limit: Catch-up limit:
401(k), 403(b), governmental 457(b),
Federal Thrift Plan
$23,500 $7,500
SIMPLE plans $16,500 $3,500

Note: Contributions can’t exceed 100% of your income.


IMPORTANT FENIMORE ASSET MANAGEMENT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax
professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

The views and opinions expressed in this article are those of Broadridge Investor Communication Solutions, Inc. and do not necessarily reflect the views of Fenimore Asset Management or its officers. Fenimore Asset Management or its officers have no editorial control over the content of the article or subject matter, and is independent of Broadridge Investor Communication Solutions, Inc.

The information herein is subject to change and is not intended to be complete or to constitute all of the information necessary to evaluate adequately the consequences of investing in any securities or other financial instruments or strategies described herein. These materials also include information obtained from other sources believed to be reliable, but Fenimore does not warrant its completeness or accuracy. In no event shall Fenimore be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction.

In part, the purpose of this presentation may be to provide investors with an update on financial market conditions. The description of certain aspects of the market herein is a condensed summary only. This summary does not purport to be complete and no obligation to update or otherwise revise such information is being assumed. These materials are provided for informational purposes only and are not otherwise intended as an offer to sell, or the solicitation of an offer to purchase, any security or other financial instrument. This summary is not advice, a recommendation or an offer to enter into any transaction with Fenimore or any of their affiliated funds.

We undertake no duty or obligation to publicly update or revise the information contained in this presentation. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of Fenimore funds, or information about the market, as indicative of future results.

All projections, forecasts and estimates of returns and other “forward-looking” information not purely historical in nature are based on assumptions, which are unlikely to be consistent with, and may differ materially from, actual events or conditions. Such forward-looking information only illustrates hypothetical results under certain assumptions and does not reflect actual investment results and is not a guarantee of future results. Actual results will vary with each use and over time, and the variations may be material. Nothing herein should be construed as an investment recommendation or as legal, tax, investment or accounting advice.

Clients or prospective clients should consider the investment objectives, risks, and charges and expenses carefully before investing. You may obtain a copy of the most recent mutual fund prospectus by calling 800-932-3271 and/or visiting www.fenimoreasset.com.

There is no guarantee that any of the estimates, targets or projections illustrated in this summary will be achieved. Any references herein to any of Fenimore’s past or present investments, portfolio characteristics, or performance, have been provided for illustrative purposes only. It should not be assumed that these investments were or will be profitable or that any future investments will be profitable or will equal the performance of these investments. There can be no guarantee that the investment objectives of Fenimore will be achieved. Any investment entails a risk of loss. An investor could lose all or substantially all of his or her investment. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice.

Fenimore Asset Management Inc. is an SEC registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made.

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ESTATE PLANNING: Plan Today. Enjoy Tomorrow. 

ESTATE PLANNING: Plan Today. Enjoy Tomorrow. 

Estate planning is important to all investors, so we created a video that provides a helpful overview and actionable steps you can take. 

The subject matter focuses on the Why, What, When, and How of estate planning.
Topics include: The Main Goals, Necessary Core Documents, A Simple Checklist, Life Events to Prioritize, Attorneys to Consider, and When to Review your Plan.
Watch the entire program above (Viewing Time = 34:35)  

Alternatively, you can choose to watch any of these shorter videos below.

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The Potential Benefits of Roth IRAs for Kids

The Potential Benefits of Roth IRAs for Kids

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    Most teenagers probably aren’t thinking about saving for retirement, buying a home, or even paying for college when they start their first jobs. Yet a first job can present an ideal opportunity to explain how a Roth IRA can become a valuable savings tool in the pursuit of future goals.

    Rules of the Roth

    Minors can contribute to a Roth IRA as long as they have earned income and a parent (or other adult) opens a custodial account in the child’s name. Contributions to a Roth IRA are made on an after-tax basis, which means they can be withdrawn at any time, for any reason, free of taxes and penalties. Earnings grow tax-free, although nonqualified withdrawals of earnings are generally taxed as ordinary income and may incur a 10% early-withdrawal penalty.

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A withdrawal is considered qualified if the account is held for at least five years and the distribution is made after age 59½, as a result of the account owner’s disability or death, or to purchase a first home (up to a $10,000 lifetime limit). Penalty-free early withdrawals can also be used to pay for qualified higher-education expenses; however, regular income taxes will apply.

In 2024, the Roth IRA contribution limit for those under age 50 is the lesser of $7,000 or 100% of earned income. In other words, if a teenager earns $1,500 this year, his or her annual contribution limit would be $1,500. Other individuals may also contribute directly to a teen’s Roth IRA, but the total value of all contributions may not exceed the child’s annual earnings or $7,000 (in 2024), whichever is lower. (Note that contributions from others will count against the annual gift tax exclusion amount.)

Lessons for life

When you open a Roth IRA for a minor, you’re giving more than just an investment account; you’re offering an opportunity to learn about important concepts that could provide a lifetime of financial benefits. For example, you can help explain the different types of investments, the power of compounding, and the benefits of tax-deferred investing. If you don’t feel comfortable explaining such topics, ask your financial professional for suggestions.

The young people in your life will thank you — sooner or later.

For questions about laws governing custodial Roth IRAs, consult your tax or legal professional. There is no assurance that working with a financial professional will improve investment results.

Securities offered through Fenimore Securities, Inc. Member FINRA/SIPC, and advisory services offered through Fenimore Asset Management, Inc.

Past performance is not indicative of future results. All investing involves risk including the possible loss of principal. Before investing, carefully read the fund’s investment objectives, risks, charges, and expenses. FAM Funds’ prospectus or summary prospectus contains this and other important information about FAM Funds and should be read carefully before you invest or send money. To obtain a prospectus or summary prospectus and performance data that is current to the most recent month-end for each fund as well as other information, please go to fenimoreasset.com or call (800) 932-3271.

Neither this presentation nor any of its contents may be distributed or used for any other purpose without the prior written consent of Fenimore. The description of certain aspects of the market herein is a condensed summary only. This summary does not purport to be complete and no obligation to update or otherwise revise such information is being assumed. These materials are provided for informational purposes only and are not otherwise intended as an offer to sell, or the solicitation of an offer to purchase, any security or other financial instrument. This summary is not advice, a recommendation, or an offer to enter into any transaction with Fenimore or any of their affiliated funds. This presentation may contain statements based on the current beliefs and expectations of Fenimore’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Any references herein to any of Fenimore’s past or present investments, portfolio characteristics, or performance, have been provided for illustrative purposes only. It should not be assumed that these investments were or will be profitable or that any future investments will be profitable or will equal the performance of these investments. There can be no guarantee that the investment objectives of Fenimore will be achieved. Any investment entails a risk of loss. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice.

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SPOUSAL INDIVIDUAL RETIREMENT ACCOUNT (IRA)

spousal individual retirement account (IRA)

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    What is a spousal individual retirement account (IRA)?

    If you meet certain conditions, you can set up and contribute to an IRA (traditional or Roth) for your spouse, even if he or she receives little or no taxable compensation for the year of the contribution. Such an IRA is commonly referred to as a spousal IRA. A spousal IRA is not, however, a special type of IRA. It is merely a way of describing the fact that you are making a contribution to your spouse’s traditional or Roth IRA. To contribute to a spousal IRA, you must meet four conditions:

    • You must be married at the end of the tax year
    • You must file a joint federal income tax return for the tax year
    • You must have taxable compensation for the year
    • Your spouse’s taxable compensation for the year must be less than your taxable compensation
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Taxable compensation includes wages and salaries, commissions, self-employment income, and taxable alimony or separate maintenance. It does not include earnings and profits from property (such as rental income, interest income, and dividend income), pension or annuity income, deferred compensation received, or any items that are excluded from income.

Example(s): You have taxable compensation of $80,000 for 2024. Your spouse has no taxable compensation. Assuming you file a joint federal income tax return and are married at the end of the tax year, you may be able to contribute up to $7,000 to an IRA in your spouse’s name ($8,000 if your spouse is age 50 or older). If you do this and are also able to contribute $7,000 to your own IRA ($8,000 if you are age 50 or older), your total IRA contribution for 2024 to the two IRAs can be as much as $14,000 ($16,000 if you are both 50 or older).

Traditional spousal IRAs and Roth spousal IRAs

If you meet the above conditions for spousal IRAs, you can contribute to a traditional IRA in your spouse’s name. All or part of your contribution to your spouse’s traditional IRA may even be tax deductible under certain conditions.

You may also be able to contribute to a Roth IRA in your spouse’s name if you meet the above conditions and your combined modified adjusted gross income (MAGI) is within certain limits (see last paragraph). Roth IRA contributions are never tax deductible, but withdrawals may be tax free under certain conditions.

How much can you contribute to a spousal IRA?

Unless your spouse is age 50 or older, you can contribute no more than $7,000 to a spousal IRA for 2024 (up from $6,500 in 2023). To be more specific, the maximum amount that you can contribute to a spousal IRA for 2024 is the lesser of:

  • $7,000 ($8,000 if your spouse is age 50 or older)
  • The combined taxable compensation of you and your spouse, less any amounts contributed to your own traditional and Roth IRAs

Example(s): You have $7,000 in taxable compensation for 2024. Your spouse has $500 in taxable compensation for 2024. Both of you are younger than age 50. You contribute $5,500 to your own Roth IRA. The maximum amount that you can contribute to your spouse’s IRA (traditional or Roth) is $2,000.

If your and your spouse’s combined MAGI for the year is more than $230,000 in 2024 ($218,000 for 2023), your ability to contribute to a Roth IRA in your spouse’s name is limited, and phased out entirely if your combined MAGI in 2024 is $240,000 or more in 2024 ($228,000 or more for 2023). If either you or your spouse is covered by an employer-sponsored retirement plan and your combined MAGI exceeds certain levels, your ability to make deductible contributions to a traditional IRA in your spouse’s name may also be limited (or phased out entirely).

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New Opportunities for Retirement Savings

New Opportunities for Retirement Savings

On December 29, 2022, Congress passed legislation that created significant changes to the retirement landscape. Dubbed the “SECURE Act 2.0,” these changes have broad impacts and provide opportunities for both retirement savers and those in retirement.

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©2023 Broadridge Investor Solutions, Inc.

IMPORTANT FENIMORE ASSET MANAGEMENT DISCLOSURES

The views and opinions expressed in this article are those of Ascensus and do not necessarily reflect the views of Fenimore Asset Management or its officers. Fenimore Asset Management or its officers have no editorial control over the content of the article or subject matter, and is independent of Ascensus.

The information herein is subject to change and is not intended to be complete or to constitute all of the information necessary to evaluate adequately the consequences of investing in any securities or other financial instruments or strategies described herein. These materials also include information obtained from other sources believed to be reliable, but Fenimore does not warrant its completeness or accuracy. In no event shall Fenimore be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction.

In part, the purpose of this presentation may be to provide investors with an update on financial market conditions. The description of certain aspects of the market herein is a condensed summary only. This summary does not purport to be complete and no obligation to update or otherwise revise such information is being assumed. These materials are provided for informational purposes only and are not otherwise intended as an offer to sell, or the solicitation of an offer to purchase, any security or other financial instrument. This summary is not advice, a recommendation or an offer to enter into any transaction with Fenimore or any of their affiliated funds.

We undertake no duty or obligation to publicly update or revise the information contained in this presentation. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of Fenimore funds, or information about the market, as indicative of future results.

All projections, forecasts and estimates of returns and other “forward-looking” information not purely historical in nature are based on assumptions, which are unlikely to be consistent with, and may differ materially from, actual events or conditions. Such forward-looking information only illustrates hypothetical results under certain assumptions and does not reflect actual investment results and is not a guarantee of future results. Actual results will vary with each use and over time, and the variations may be material. Nothing herein should be construed as an investment recommendation or as legal, tax, investment or accounting advice.

Clients or prospective clients should consider the investment objectives, risks, and charges and expenses carefully before investing. You may obtain a copy of the most recent mutual fund prospectus by calling 800-932-3271 and/or visiting www.fenimoreasset.com.

There is no guarantee that any of the estimates, targets or projections illustrated in this summary will be achieved. Any references herein to any of Fenimore’s past or present investments, portfolio characteristics, or performance, have been provided for illustrative purposes only. It should not be assumed that these investments were or will be profitable or that any future investments will be profitable or will equal the performance of these investments. There can be no guarantee that the investment objectives of Fenimore will be achieved. Any investment entails a risk of loss. An investor could lose all or substantially all of his or her investment. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice.

Fenimore Asset Management Inc. is an SEC registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made.


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3 Investing Tips for the New Year

3 Investing Tips for the New Year

A new year is the perfect time to review your investing goals. Below we’ve listed some simple actions that could make a big difference over time.

  1. PAY YOURSELF FIRST. Treat your savings like a bill that you must pay. Identify your savings goals, get started, or continue saving. Have a target to increase this each year if you can.
  2. PUT INVESTING ON AUTOPILOT. Dollar-cost averaging is a strategy that involves investing a fixed-dollar amount in regular intervals which can reduce risk during short-term market conditions. FAM Funds offers an automatic investing program that you can easily add to your account. 
  3. STAY THE COURSE AND THINK LONG TERM. There is an overwhelming amount of research that shows that long-term investing – even through a stock market downturn – yields better results over time than trying to time the market. It’s time in the market, not market timing, that counts.  
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3 Investing Tips for the New Year

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All Aboard!

All Aboard!

Tom Putnam, Fenimore Asset Management’s Founder & Executive Chairman, has a saying, “You have to be aboard the train before it leaves the station.” His analogy pertains to investing,  especially investors who believe that they can time the market.

Market timers hope they can catch the market at its highest or lowest point in an attempt to maximize returns and often let their emotions get in the way of rational decision making. They become fearful and sell when they should buy. The typical result is that they miss market upswings and their gains are much less than what they would have been if they had just stayed the course. Trying to time the market does not work over the long term.

Time in the Market — Not Market Timing

Nobel Prize laureate William Sharpe found that stock market timers must be right most of the time just to equal the returns that buy-and-hold, long-term investors achieve. While long-term investors are steady, market timers sweat over when is the best time to get in or out of the market. There is an overwhelming amount of research that shows that long-term investing — even through a stock market downturn — yields better results over the years than trying to time a decline, remove capital, and return when “things are better.”

What if the market drops?

Some investors are concerned that the train is going to sputter. The fact is, at some juncture, it will — it’s an inevitable part of the journey. When the market drops, Fenimore seeks opportunities to invest in what we believe are quality, well-managed businesses at a discount to our estimate of their economic worth. We try to use downturns to strengthen our mutual funds for the long haul.

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All Aboard

Long-term investing or market timing? It’s your decision. But if you’re looking for us, we’ll be on the train.


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4 Things To Consider Before You Invest

4 Things To Consider Before You Invest

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    We live in an ever-changing, global investment landscape — and yet, the stock market and U.S. economy seem to go through the same cycles over and over. With each era, new investment trends surface. Often complicated and difficult for investors to understand, these “latest and greatest” investment offerings tend to fade away. Plus, no matter which way you turn, you’ll likely find an “expert” enticing you to try to time the market or chase performance. The noise can be overwhelming.

    What Can You Do?

    Tune out the noise and focus on what matters — you and your long-term financial goals. Before you hire an investment manager, make sure you consider and understand their “Four Ps” giving equal weight to each.

    1. People: Call or visit the firm’s office. Get a feel for their culture and be sure to ask how long the portfolio managers have worked there — longevity can be a good sign.
    2. Philosophy: Can the investment managers clearly explain their philosophy within one minute?
    3. Process: Make sure their investment process is detailed, yet straightforward and understandable.
    4. Performance: Unfortunately, many investors look at performance as the most important factor. Past performance is no guarantee of future results so it’s crucial to evaluate all Four Ps equally.
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Saving for a Child’s College vs. Saving for Retirement

Saving for a Child’s College vs. Saving for Retirement

Kevin Smith, CFP®, Director of Fenimore’s Private Client Services, provides insights on this popular subject. For a more in-depth look at whether you are building enough wealth for your desired retirement lifestyle, watch Kevin’s video, “Investing for What Matters Most.”

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Investing for What Matters Most

Investing for What Matters Most

Fenimore’s Director of Private Client Services, Kevin Smith, CFP®, hosts this investor education video and covers topics such as:

  • How Your Savings Compare to Your Age Group
  • How Much Should You Save and Where
  • Paying Down Debt vs. Investing
  • Understanding Different Retirement Accounts
  • The Impact of Inflation on Your Savings
  • An Action Item Checklist
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