5 questions to ask your advisor in 2025

THE START OF A NEW YEAR can be a great time to review progress toward your short- and long-term financial goals and consider possible adjustments. This year, with uncertainties about inflation, new leadership in Washington and heightened global tensions, a year-ahead review may be more important than ever. These five questions provide a useful starting point for productive planning conversations with your advisor now and throughout the year.

1. What’s the outlook for inflation and interest rates in 2025 — are there any moves I should consider now?

“The exact trajectory of inflation in 2025 depends on several things, including when we get announcements about new fiscal policy and tariffs,” says Aditya Bhave, senior U.S. economist, BofA Global Research. “We believe inflation will get stuck between 2.5% and 3%, and with the labor market showing signs of stabilizing, we expect the Federal Reserve will keep rates on hold this year.”

What could that mean for your finances? If you’re looking for an improvement in the housing market or are considering buying a home, you may be disappointed. Mortgage rates are likely to decline only modestly in 2025, according to Fannie Mae,¹ whose economists expect rates to remain above 6% and sales of existing homes to stay stuck near 30-year lows.

For savers, lower short-term interest rates will probably lead to a reduction in the interest paid by money market funds, certificates of deposit and other cash-equivalent investments. “Looking ahead, cash as an investment will likely only keep pace with inflation,” says Matthew Diczok, head of Fixed Income Strategy for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank. So, unlike in the recent past, when rates on cash investments were at 5% or higher, you’ll need to invest in longer-term fixed income to get better yields.

2. Have there been any rule changes that could help me save more for retirement in 2025?

“An annual inflation adjustment has increased the contribution limit for 401(k)s and other workplace retirement plans from $23,000 to $23,500 for 2025,” notes Nevenka Vrdoljak, a managing director and analyst in the CIO for Merrill and Bank of America Private Bank.

But the biggest change for retirement savers this year comes courtesy of the SECURE 2.0 Act. “In 2025, the maximum catch-up contribution for savers age 60 through 63 will be $11,250, letting you save, pre-tax, a very substantial $34,750 in 2025, compared with the regular catch-up limit of $7,500 for those age 50 and up, or a maximum of $31,000,” says Vrdoljak. People earning above a certain amount (around $145,000) will be required to make these catch-up contributions on an after-tax Roth basis beginning in 2026, she notes.

For younger savers, a provision of the SECURE 2.0 Act kicks in this year requiring all 401(k) plans established after December 29, 2022, to automatically enroll their employees (though employees may opt out if they choose).

What could that mean for your finances? Every little bit you can stash away for your retirement is a plus, especially when it’s tax-deferred, says Vrdoljak. And for young savers, automating enrollment in a 401(k) can take the stress out of a decision younger savers are often reluctant to make. “The sooner you start saving for retirement, and taking advantage of company matches if they’re offered, the better off you’ll be.”

3. What about my portfolio — does my current allocation to equities make sense in today’s markets?

Even after two years of unusually strong performance by U.S. equities, there are reasons for optimism for the coming year, the rest of this decade and beyond, believes the Chief Investment Office. “Strong corporate fundamentals, a resilient U.S. consumer and the extraordinary power of emerging technologies all point toward a transition to an era of extended prosperity and growth,” says Marci McGregor, head of Portfolio Strategy for the CIO.

What could that mean for your investments? Corporate profits, averaging around 9% for 2024, are likely to accelerate into the low double digits in 2025, says McGregor. That growth in earnings should help equity market performance expand beyond the short list of high-flying technology companies that have dominated the market recently. “Overall, it will be difficult to match the performance of the recent past, but we do expect some parts of the market, including small-cap stocks, to potentially see an upturn,” she says. Watch the 2025 Year-Ahead Outlook webcast, “Get ready for what’s next,” for more insights on how to prepare for the potential risks and opportunities ahead.

4. I’ve heard that big changes could be coming for gift and estate tax rules. What can I do to prepare?

The Tax Cuts and Jobs Act of 2017 more than doubled the amount that’s exempt from gift or estate taxes. In 2025, the maximum is $13,990,000 for individuals; for couples, it’s twice that amount, or $27,980,000.² But the law expires at the end of this year, and unless it’s renewed, the individual exemption is predicted to drop to about $7 million in 2026, notes the CIO’s National Wealth Strategies (NWS) team.

What could that mean for your finances? “Planning ahead to take advantage of the generous current limits makes a lot of sense,” says Timothy Herbst, a wealth strategies executive for Bank of America Private Bank. “You could use the current exemption levels to make gifts of cash or securities, real estate, business interests or other assets to your children or other beneficiaries now, possibly in one or more kinds of trusts,” he adds. “But given the complexity of these issues, determining what works best for you will mean weighing many factors, from tax considerations to the ultimate goals of your gifting strategy.” If you’re thinking about establishing a trust or making other kinds of gifts, be sure to work with your advisor and an experienced estate attorney, as well as your tax professional.

5. Are there other tax changes coming that I should plan for now?

As the U.S. population ages, more and more people are inheriting wealth, including IRAs. Most IRAs inherited by non-spouses must be fully distributed within 10 years of the original owner’s death. In 2025, after a four-year grace period, most owners of inherited IRAs will have to start taking required minimum distributions (RMDs) from those accounts.

What could that mean for your finances? The additional income from the RMDs could push you into a higher tax bracket, notes the NWS team. To manage that tax liability, you could choose to take a larger distribution in years when your taxable income is lower than usual.

These five questions are a good start but keep the conversation going. Check in with your advisor whenever your life changes or the markets shift to see if you need to make course corrections. Financial planning is a dynamic process, and your advisor is there to help you every step of the way.