IRA contribution amounts

For 2025, eligible taxpayers can make contributions to a traditional or Roth IRA of up to the lesser of $7,000 or 100% of earned income. They can also make extra catch-up contributions of up to $1,000 annually to a traditional or Roth IRA. If you’ll be 50 or older as of December 31, 2025, you can make a catch-up contribution for the 2025 tax year by April 15, 2026.

Extra deductible contributions to a traditional IRA create tax savings, but your deduction may be limited if you (or your spouse) are covered by a retirement plan at work and your income exceeds a certain amount.

Extra contributions to Roth IRAs don’t generate any upfront tax savings, but you can take federal-income-tax-free qualified withdrawals after age 59½. There are also income limits on Roth contributions.

Higher-income individuals can make extra nondeductible traditional IRA contributions and benefit from the tax-deferred earnings advantage.

Employer plan contribution amounts

For 2025, you can contribute up to $23,500 to an employer 401(k), 403(b) or 457 retirement plan. If you’re 50 or older and your plan allows it, you can contribute up to an additional $7,500 in 2025. Check with your human resources department to see how to sign up for extra contributions.

Contributions are subtracted from your taxable wages, so you effectively get a federal income tax deduction. You can use the tax savings to help pay for part of your extra catch-up contribution, or you can set the tax savings aside in a taxable retirement savings account to further increase your retirement wealth.

Examples of how catch-up contributions grow

How much can you accumulate? To see how powerful catch-up contributions can be, let’s run a few scenarios.

Example 1: Let’s say you’re age 50 and you contribute an extra $1,000 catch-up contribution to your IRA this year and then do the same for the following 15 years. Here’s how much extra you could have in your IRA by age 65 (rounded to the nearest $1,000):

·  4% annual return: $22,000

·  8% annual return: $30,000

Keep in mind that making larger deductible contributions to a traditional IRA can also lower your tax bill. Making additional contributions to a Roth IRA won’t, but they’ll allow you to take more tax-free withdrawals later in life.

Example 2: Assume you’ll turn age 50 next year. You contribute an extra $7,500 to your company plan in 2026. Then, you do the same for the next 15 years. Here’s how much more you could have in your 401(k), 403(b), or 457 plan account (rounded to the nearest $1,000):

·  4% annual return: $164,000

·  8% annual return: $227,000

Again, making larger contributions can also lower your tax bill.

Example 3: Finally, let’s say you’ll turn age 50 next year and you’re eligible to contribute an extra $1,000 to your IRA for 2026, plus you make an extra $7,500 contribution to your company plan. Then, you do the same for the next 15 years. Here’s how much extra you could have in the two accounts combined (rounded to the nearest $1,000):

·  4% annual return: $186,000

·  8% annual return: $258,000

The amounts add up quickly

As you can see, catch-up contributions are one of the simplest ways to boost your retirement wealth. If your spouse is eligible too, the impact can be even greater. Contact us if you have questions or want to see how this strategy fits into your retirement savings plan.

© 2025

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What Is a Roth IRA?

A Roth IRA is used to contribute after-tax dollars. The benefit of a Roth account is that your savings become tax-free. The income that you contribute to a Roth IRA account is taxed upfront, so there is no reduction in your taxes. 

What is a Traditional IRA?

Traditional IRAs are used by those who want to contribute pre-tax or after-tax dollars. This type of account offers instant tax benefits. Depending on your financial situation, contributions can become tax deductible. Unlike a Roth IRA, you are expected to pay income tax on your withdrawals.

The Difference Between Roth vs. Traditional IRA 

The main difference between Roth IRA and traditional IRA is how they deal with taxes. With a Roth IRA, you contribute money that you’ve already paid taxes on, normally called post-tax income. However when you withdraw the money, you can take it out tax-free and penalty free at any time. You will only pay tax on the interest that you gained.

With a traditional IRA, you contribute money that has not been taxed, called pre-tax income. A traditional IRA allows you to lower your income level, which allows you to pay lower taxes. However, the money will be taxed when it is withdrawn. If you withdraw the money before you turn 59 ½ and don’t qualify for a short list of IRS-approved purposes, then you will be penalized an extra 10% on the amount that is withdrawn.

There are income limits, which change year to year, that may not allow you to contribute to either IRA Plans. Please consult with your financial advisor or CPA to determine if you would qualify. 

Contact Your Local Financial Advisor or CPA 

Setting up a retirement account can be daunting, when you are not sure how to start. Your local financial advisor or CPA can help you to determine the best plan for you and your future.

If you are currently looking for a professional in Madison, Mississippi or Moncks Corner, South Carolina, Lightheart, Sanders and Associates can guide you through the IRA process. Our team has the experience and skills to help and answer any questions you have. Get started on your retirement strategy by contacting us today.  

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Discuss the Topic of Money

Discussions about money may feel uncomfortable at times, but it doesn’t have to feel that way. Asking the right questions can bring up better conversations and teaching opportunities. Be sure to ask questions that will motivate your child to think of goals and start saving for something they always wanted. 

Wants vs. Needs

It is important that kids understand the difference between wanting something and needing it. Needs are things that support well-being that allow you to live a comfortable lifestyle. This would involve shelter, food, education, clothing, transportation, hygiene, and health. Wants are all of the things that you don’t necessarily need, but would like to have. This could involve trending clothing, toys, electronics, or fun activities. 

Teach your child how to budget. Teach them about your own monthly expenses and how much you pay for necessary things like bills, gas, and food. Then once everything is paid off, show how much is left and how much should go towards savings before investing in something you want. That money should be what you have left after paying off all the important expenses and having enough to save.

Give Them an Allowance

Teach your child the value of hard work by giving them a weekly or monthly allowance, based on household chores. You don’t want to give them money any time they ask for it, but rather they should work for their money. When children learn how to save money that they earned at an early age, they are more likely to appreciate working.

Setting Goals

Goals are a great way to teach self-control when it comes to spending money. Sit down with your child and go over something they are interested in purchasing. If they have been asking you for a bike, come up with goals together that motivates them to save up for it. Saving and purchasing the bike on their own will teach them the value of saving and that when you save you have more opportunities lined up. Guide them through the process and discuss how much money they should save from their allowance each week in order to reach their goal at a reasonable time.

How to Always Be Prepared

Covid19 was an unexpected event that no one really saw coming. It caused a huge financial burden on a lot of families and businesses. This was a huge wake up call for a lot of people on the importance of always having enough money saved up in case something comes up. A lot of people live paycheck to paycheck and this can be risky. Teach your kids at a young age to avoid developing this bad habit. It is best to always put money in your savings. You never know what may happen to your home, car, or if an emergency comes up. The more prepared you are financially, the less stressed you will feel in the future.

Be an Example

If you are someone who struggles with saving money, then your kids most likely will too. Children learn best by example and if you want them to save, you need to start saving. Take your child shopping with you and teach them about sales or how to make a purchase. Let your kids know about your retirement plans, emergency saving funds, and other saving accounts you may have. Teach them the benefits of these accounts and how they have given you the financial freedom you worked hard for. Also, get your kids involved in saving up for costly miscellaneous items or activities. If there is a bike they always wanted or a place they want to visit, then plan and save together. 

Learn More About Finances 

Do you want to become an even better financial example to your family? Get in contact with an accountant today! If you are a small business owner who is looking for more financial freedom and guidance with all of your business expenses, then contact the professionals at Lightheart, Sanders and Associates. We use easy, customized strategies and tools to help your business to grow. We are here to handle the finances, so you can enjoy more time with your family. If you are needing more advice on saving money, then call us today and we would be more than happy to assist you.

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For as long as money has been around, people have let it control them. Everyone has different thoughts and opinions about money, but most people would probably agree that saving money is important. Saving money teaches important life principles, and protects us from future circumstances. We know there are a lot of thoughts about this topic, so here are some of our favorite quotes about saving money.

1. “Do not save what is left after spending, but spend what is left after saving.” – Warren Buffett

Warren Buffett is one of the richest people in the world, so it makes sense he has opinions on money. We like this quote because it is a simple idea to remember. Next time you get paid, put a portion of that money into a savings account, and then budget what’s left. That way, you’ll already have money saved when you pay off your expenses or when unforeseen emergencies arise.

2. “Never spend your money before you have it.” – Thomas Jefferson

This quote seems pretty straightforward. But it’s easier than you think to spend money you don’t have. Credit cards are often used when we can’t afford something, but that’s an easy way to go into debt. We know credit cards and loans are great ways to build necessary credit, so use them! But make sure you are able to immediately pay off what you spend or can afford the monthly payments on a loan. When in doubt, save up and pay cash when possible.

3. “By definition, saving – for anything – requires us to not get things now so that we can get bigger ones later.” — Jean Chatzky

We know those small weekend getaways or fancy dinners are fun! But, if you choose to forgo those activities for a while, you’ll be able to afford a long, luxurious vacation in the future. Same goes for other things. Take public transportation while you save up for your dream car. Thrift your wardrobe to buy a new expensive dresser. There are plenty of ways to skip spending now, and save money for later.

4. “Beware of little expenses; a small leak will sink a great ship.” — Benjamin Franklin

Sure, a coffee from the cafe down the street here and there won’t break the bank, but a daily coffee just might. Too many of these seemingly inexpensive coffees can add up to a large sum. Same goes for other small purchases. Make sure you’re keeping track of how much these little expenses add up monthly, and then budget them in if they’re important to you!

5. “Someone’s sitting in the shade today because someone planted a tree a long time ago.” — Warren Buffett

You never know what today’s efforts might bring in the future. Saving now can benefit you in the long run– with a larger savings account and healthy spending habits that can be passed down through your family for generations.

6. “A budget is telling your money where to go, instead of wondering where it went.” — John C. Maxwell

Don’t let money or the lack thereof control your life. Take control! Creating a budget is the perfect way to do that as you can see exactly where your spending is going. You’ll be in charge of how much you spend instead of spending as you go and then wondering where your money went.

There are many budgeting apps out there that can help you get started on saving, or reach out to LSA for help! 

7. “Every time you borrow money, you’re robbing your future self.” — Nathan W. Morris

We know emergencies happen. Borrowing money may seem like a good idea at first, but when it comes time to pay it off, there may also be other expenses you weren’t anticipating. That’s why having a solid savings is important. There’s no immediate need to pay it all back like you do when you borrow money. You can build it back as time goes on.

8. “It is never too early to encourage long-term savings.” — Ron Lewis

Building healthy spending/saving habits early in life can bring about lifelong benefits. Start saving as soon as you can, and teach your children how to do so also! Encourage them to put part of what they make into savings, even if it’s a tiny amount. Any saving is better than none!

9. “The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.” – T.T. Munger

This quote is possibly our favorite. What people often forget is that saving money doesn’t just build a larger bank account, it also teaches other important skills. It allows you to stay organized, practice self-control and helps you plan for your future. Saving money can help you see the worth of things, besides money.

10. “A man who both spends and saves money is the happiest man, because he has both enjoyments.” – Samuel Johnson

We’ve talked a lot about saving money, but we know that spending money is equally important. What’s important is to find the balance between the two. Saving money isn’t worth much when you aren’t spending it. Why save money for a trip to Greece if you won’t book a ticket? Life is to be enjoyed, and sometimes that has a price tag.

Lightheart, Sanders & Associates is Here to Help

At LSA, we understand that saving money can be stressful. Sometimes guidance is needed. That’s why we’re here to help! Our accounting firm provides tax services, audits, and accounting consulting. Feel free to contact us with any questions you may have, and start saving today!

The post 10 Best Quotes About Saving Money first appeared on Lightheart, Sanders and Associates.

But if real estate’s your game, did you know that it’s possible to defer capital gains by taking advantage of a tax break that allows you to swap investment property on a tax-deferred basis?

Named after Section 1031 of the tax code, a like-kind exchange generally applies to real estate and were designed for people who wanted to exchange properties of equal value. If you own land in Oregon and trade it for a shopping center in Rhode Island, as long as the values of the two properties are equal, nobody pays capital gains tax even if both properties may have appreciated since they were originally purchased.

Section 1031 transactions don’t have to involve identical types of investment properties. You can swap an apartment building for a shopping center, or a piece of undeveloped, raw land for an office or building.

You can even swap a second home that you rent out for a parking lot.

There’s also no limit as to how many times you can use a Section 1031 exchange.

It’s entirely possible to roll over the gain from your investment swaps for many years and avoid paying capital gains tax until a property is finally sold. Keep in mind, however, that gain is deferred, but not forgiven, in a like-kind exchange and you must calculate and keep track of your basis in the new property you acquired in the exchange.

Section 1031 is not for personal use. For example, you can’t use it for stocks, bonds and other securities, or personal property (with limited exceptions such as artwork).

Properties of unequal value

Let’s say you have a small piece of property, and you want to trade up for a bigger one by exchanging it with another party. You can make the transaction without having to pay capital gains tax on the difference between the smaller property’s current market value and your lower original cost.

That’s good for you, but the other property owner doesn’t make out so well. Presumably, you will have to pay cash or assume a mortgage on the bigger property to make up the difference in value. This is referred to as “boot” in the tax trade, and your partner must pay capital gains tax on that part of the transaction.

To avoid that you could work through an intermediary who is often known as an escrow agent. Instead of a two-way deal involving a one-for-one swap, your transaction becomes a three-way deal.

Your replacement property may come from a third party through the escrow agent. Juggling numerous properties in various combinations, the escrow agent may arrange evenly valued swaps.

Under the right circumstances, you don’t even need to do an equal exchange. You can sell a property at a profit, buy a more expensive one, and defer the tax indefinitely.

You sell a property and have the cash put into an escrow account. Then the escrow agent buys another property that you want. He or she gets the title to the deed and transfers the property to you.

Mortgage and other debt

When considering a Section 1031 exchange, it’s important to take into account mortgage loans and other debt on the property you are planning to swap. Let’s say you hold a $200,000 mortgage on your existing property but your “new” property only holds a mortgage of $150,000. Even if you’re not receiving cash from the trade, your mortgage liability has decreased by $50,000. In the eyes of the IRS, this is classified as “boot” and you will still be liable for capital gains tax because it is still treated as “gain.”

Advance planning required

A Section 1031 transaction takes advance planning. You must identify your replacement property within 45 days of selling your estate. Then you must close on that within 180 days. There is no grace period. If your closing gets delayed by a storm or by other unforeseen circumstances, and you cannot close in time, you’re back to a taxable sale.

Find an escrow agent that specializes in these types of transactions and contact your accountant to set up the IRS form ahead of time. Some people just sell their property, take cash and put it in their bank account. They figure that all they have to do is find a new property within 45 days and close within 180 days. But that’s not the case. As soon as “sellers” have cash in their hands, or the paperwork isn’t done right, they’ve lost their opportunity to use this provision of the code.

Personal residences and vacation homes

Section 1031 doesn’t apply to personal residences, but the IRS lets you sell your principal residence tax-free as long as the gain is under $250,000 for individuals ($500,000 if you’re married).

Section 1031 exchanges may be used for swapping vacation homes, but present a trickier situation. Here’s an example of how this might work. Let’s say you stop going to your condo at the ski resort and instead rent it out to a bona fide tenant for 12 months. In doing so, you’ve effectively converted the condo to an investment property, which you can then swap for another property under the Section 1031 exchange.

However, if you want to use your new property as a vacation home, there’s a catch. You’ll need to comply with a 2008 IRS safe harbor rule that states in each of the 12-month periods following the 1031 exchange you must rent the dwelling to someone for 14 days (or more) consecutively. In addition, you cannot use the dwelling more than the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented out for at fair rental price.

You must report a section 1031 exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred. If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

While they may seem straightforward, like-kind exchanges can be complicated. There are all kinds of restrictions and pitfalls that you need to be careful of. If you’re considering a Section 1031 exchange or have any questions, don’t hesitate to call.

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