The Latest Personal Finance News for February 2025

New Retirement Rule Gives Older Workers More Room to Save

In 2025, employees can contribute up to $23,500 to their 401(k) plans and other workplace retirement plans. Those ages 50 and older can add catch-up contributions of up to $7,500, for a total of $31,000.

However, with a new rule under the Secure 2.0 Act, workers ages 60 to 63 who participate in a workplace retirement plan qualify for an even higher catch-up contribution limit of $11,250, for a total of $34,750.

Why It Matters

If you're nearing retirement and maxing out your contributions on an employer plan, you can now take advantage of more tax-sheltered catch-up contributions.

Although those contributions won't have as much of an impact over a short period of time before you retire, they can give you a slight boost to your retirement income over a longer period.

What You Can Do

• Read Experian's retirement planning guide.
• Learn about the different ways you can save for retirement.
• Find out how much you should have saved by age.
• Get details on how long your retirement savings will last.

Path to 2% Inflation Remains Bumpy

The consumer price index (CPI) rose by 2.9% in December, according to the Bureau of Labor Statistics. On a month-to-month basis, the index rose by 0.4%, an increase from 0.3% in November.

The good news is that the Personal Consumption Expenditures (PCE) price index—the Federal Reserve's preferred inflation metric—is closer to the agency's target of 2%, sitting at 2.4% in November. However, that's an increase from 2.1% in September.

Why It Matters

After a few rate cuts by the Federal Reserve to close out 2024, the outlook on inflation has returned to its previous air of uncertainty.

What's more, experts aren't expecting a light at the end of the tunnel anytime soon. According to a quarterly survey of 73 economists by the Wall Street Journal, the CPI is expected to rise by 2.7% in December of this year. In the previous study performed in October, expectations were at 2.3%.

What You Can Do

• Learn more about the federal funds rate.
• Look for the next inflation report on February 12.
• Read up on ways you can fight inflation.
• Look for ways to reduce your risks when borrowing money.

Mortgage Rates Climb Above 7% Again

After flirting with sub-6% territory in September, the average interest rate for a 30-year fixed-rate mortgage hit 7.04% in mid-January, according to Freddie Mac. It's the first time the rate has breached the 7% threshold since May 2024.

Like the inflation rate, economists don't expect mortgage rates to come down significantly in the near term. In fact, some believe it's unlikely that we'll see rates dip back to 6% until sometime in 2026, largely due to the uncertainty of the economic impact of the new administration's proposed policies.

Why It Matters

Mortgage interest rates have been uncomfortably high for nearly three years now, disrupting the housing market and pushing mortgage payments to unaffordable levels for many.

Despite some short-lived hope for relief in 2024, it remains unclear if and when rates will return to the pre-pandemic levels seen before market volatility took hold. Those who can't afford to buy or refinance at the current rate may need to exercise patience or consider other alternatives.

What You Can Do

• Learn how to deal with high mortgage rates.
• Read up on how mortgage interest works.
• Consider whether to buy a house when rates are high.
• Understand the pros and cons of refinancing a mortgage loan.

Tax Season Has Begun

Filing season for the 2024 tax year began on January 27, according to the IRS. Additionally, with a January 31 deadline for employers to send W-2 and 1099 forms, employees and contractors should expect to receive their necessary income documents soon if they haven't already.

Why It Matters

The deadline to file your tax return and pay anything you might owe isn't until mid-April. However, it's a good idea to complete the process as soon as you can to avoid the possibility of falling victim to tax fraud.

If you're owed a refund, the sooner you gain access to that cash, the better.

What You Can Do

• Find out which documents you need to file your return.
• Read up on tips to make tax filing easier.
• Make sure you know the 2025 tax deadlines.
• Figure out what to do with your tax refund.

Good Credit Can Contribute to a Healthy Financial Plan

While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.

With Experian's free credit monitoring service, you'll get access to your FICO^® Score^☉ and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.