The calendar page has turned and 2024 is well on its way. Before we get too far down the road, be sure to check out these changes around retirement savings.
Every so often the federal government approves changes to the contribution limits for tax-advantaged retirement plans. Staying up to date on these changes is important so you know how you and your future could be impacted. We’ve outlined some of them below but, as always, be sure to check with your financial advisor for a more comprehensive review.
- Changes affecting retirement contributions in 2024You may choose to automate your contributions to your retirement fund and then just forget about them. That’s okay! But take a moment to review these changes with a financial advisor to see if they could affect your savings goals. You may decide to make some adjustments.
- The annual contribution limit for 401(k), 403(b) and most 457 plans, as well as the government’s Thrift Savings Plan, increased by $500, from $22,500 to $23,000. Those ages 50 and older can save an additional $7,500 per year in catch-up contributions.
- The annual contribution limit for a traditional IRA also increased by $500, from $6,500 to $7,000. The catch-up contribution for those ages 50 and older is an additional $1,000.
- The income ranges to determine eligibility for contributions to a Roth IRA increased, with the amount depending on your tax-filing status.
- For anyone using a Health Savings Account as an additional retirement savings vehicle, the annual contribution maximum increased to $4,150 for individual coverage and $8,300 for families. Those ages 55 and older can bank another $1,000 on top of these limits.
- Changes to withdrawal limits and the associated penaltiesIt’s very important to know the limits and timing around withdrawals from your retirement accounts. This year, some of the limits for IRA withdrawals were updated. Here’s what to consider:
- New rules allow withdrawals from a traditional IRA up to $1,000 for personal or family emergency expenses without paying the 10% early withdrawal penalty.
- You can also avoid the early withdrawal penalty for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. The amount of the withdrawal is limited to the cost of the incurred expense.
- Other qualified expenses for a penalty-free early withdrawal are higher education expenses, home purchases (up to a $10,000 maximum lifetime benefit) and certain expenses for military reservists called to active duty.
- Keep in mind you will still have to pay income tax on the funds you withdraw from your traditional IRA.
- New timing for required withdrawalsRequired minimum distributions from tax-advantaged retirement plans now begin at age 73 instead of age 72. Delaying your distributions could affect your tax situation, so be sure to check with a qualified tax advisor or wealth advisor before deciding when to begin withdrawing from a tax-advantaged retirement plan.
