2024 Changes that Would Impact Your Retirement Finances
April 1, 2024
Changes to retirement regulations are making 2024 out to be the perfect time to reexamine your retirement planning and make sure you’re getting the most out of your savings.
“The rules are constantly changing,” says director of Personal Retirement Product Management at Bank of America Debra Greenberg. “It’s always a good idea to familiarize yourself with what’s new to see whether it makes sense to take advantage of it.”
Here’s what you should know about several changes to retirement regulations in 2024.
It Pays to Plan for Retirement
While the changes to retirement regulations may seem small, Americans need all the help they can get right now. According to the National Council on Aging, up to 80% of older adults are at risk of dealing with economic insecurity as they age, while half of all Americans report being behind on their retirement savings goals.
“The IRS adjusts many things each year to reflect cost of living and inflation,” says Jackson Hewitt’s chief tax information officer Mark Steber. “It happens each year and taxpayers shouldn’t be alarmed — they might even have a bigger benefit.” Since retirement contributions are pre-tax, saving for retirement actually lowers your taxable income, which may even place you into a lower tax bracket. Plus, you may even be eligible for a tax credit of up to 50% of what you put into your retirement accounts.
Contribution Limits Will Increase
The contribution limits for a traditional or Roth IRA are increasing in 2024. The limit on annual contributions to an IRA will go up to $7,000, up from $6,500 last year.
Individuals will be able to contribute more to their 401(k) and employer-based plans as well. For those who have a 401(k), 403(b), most 457 plans, or the federal government’s Thrift Savings Plan, the contribution limit is increasing to $23,000 in 2024, which is $500 more than last year. Those who are 50 and older, can contribute up to $30,500 into the same accounts.
Starter 401k Plans are Possible
In 2024, employers who don’t sponsor a retirement plan may offer a Starter 401(k) deferral-only arrangement. A starter 401(k) is a simplified employer-sponsored retirement plan with lower saving limits than a standard 401(k). Employers are not allowed to make contributions, and employee auto-enrollment is required. In 2024, the annual contribution limit to this plan will be $6,000. Beginning this year, employees with certain qualifiable emergencies may also make penalty-free withdrawals from their 401(k) of up to $1,000, though they would still have to pay the income tax on those withdrawals.
529 Plans Can Now be Converted Into Roths
For parents who will no longer need their 529 funds for their children, the Secure 2.0 Act will allow for a portion of the 529 to be rolled into a Roth IRA. Beginning January 1st, the funds can either be used for educational expenses or put toward retirement, as a Roth IRA rollover. You may rollover up to $35,000, free of income tax or any tax penalties. The only limitations are that the 529 must have been in place for at least 15 years, and certain states may not allow the rollover.
Changes to Social Security and RMDs
In January, Social Security checks will increase by 3.2% due to the latest COLA, or cost-of-living adjustment. On average, Social Security monthly benefits will increase by $59 a month, from $1,848 to $1,907. Those who receive survivors or spousal benefits will receive even more.
For 2024, the maximum benefit for a worker who claims Social Security at FRA (Full Retirement Age)is $3,822 a month, which is up from $3,627 in 2023. For 2024, the FRA is 66 years and 6 months for those born in 1957 and 66 years and 8 months for those born in 1958. That means that anyone born between July 2, 1957 through May 1, 1958 will reach FRA in 2024.
The IRS uses a calculation based on the amount in your retirement account and your life expectancy to determine the minimum amount you are required to take out each year, known as RMDs (required minimum distributions). Secure 2.0 increased the age for starting RMDs from 72 to 73, effective in 2023. If you are subject to RMDs, then you must make your withdrawal by the end of this year or by April 1st next year if it’s your first year being eligible. So if you turn 73 in 2024, you’ll have until April 1, 2025 to make your first RMD.
Anyone receiving more Social Security but paying Medicare premiums may not feel much of a difference in their increased Social Security benefits since standard Medicare Part B premiums are rising by 6%. As many participants have their Medicare premium deducted right from their Social Security payment, the $9.80 increase will take a portion of the average $59 benefit increase. The annual deductible will also increase this year from $226 to $240.
Insureyouknow.org It will always be important to review your retirement savings every year, but this is becoming even more important to do in the face of rising costs and changing regulations. With Insureyouknow.org, storing all of your financial information in one easy-to-review place can help you ensure that you are still on track to meet your retirement goals at the start of each annual review.