Investor Education | Retirement Planning in 2024 - 4 Ways It is Changing.

Retirement planning is always changing, these changes in 2024 could be to your advantage. There are new policies and procedures as well as an update to Contribution Limits.

1.401(k) & IRA Plan Contribution Limits Increase

• The limit on annual contributions to an IRA increased from $6,500 in 2023 to $7,000 in 2024.
• Contribution limits for employees who participate in 401k, 403(b), and most 457 plans, as well as the federalgovernment’s Thrift Savings Plan, will increase from $22,500 in 2023 to $23,000 in 2024.
• Participants in 401k, 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan who are50 and older, can contribute up to $30,500 in 2024.
• Catch-up contributions for taxpayers 50 and older are subject to cost-of-living adjustments, but these limitsremain unchanged for 2024 at $1,000 ($8,000 total).

*Note: You can only make the maximum contribution to your Roth IRA if your modified adjusted gross income (MAGI) is below the threshold set for the year. See below for a link for the aforementioned thresholds: https://www.fidelity.com/learning-center/smart-money/ira-contribution-limits

2. 529 Plan Converting to Roth Accounts

For parents whose students decide against college or if they qualify for scholarships and now don’t need the 529 funds — the Secure 2.0 Act, passed in December 2022, allows for a portion of a 529 to be rolled over to a Roth IRA tax and penalty-free, as long as certain conditions are met.

• Starting January 1, the funds can now be used for qualified education expenses or put toward retirement.
• The 529 plan to Roth IRA rollovers will go into effect on January 1, 2024.
• In 2024, you can now rollover up to $35,000 from a 529 plan to an IRA, free of income tax or tax penalties.
• There are restrictions limiting who can do these transfers and when, including that your 529 plan has to have been in place for at least 15 years.
• Your state may not conform to these rules starting January 1, 2024.

3. Starter 401(k) Plans

• In 2024, employers that do not sponsor a retirement plan can now offer a “Starter 401k deferral-only” arrange­ment.
• For 2024, Starter 401k limits are $6,000 annually, with a $1,000 catch-up contribution, beginning at age 50.
• Employees can now contribute an extra $500 to their 401k plan starting in 2024.
• Starting in 2024, there are more exceptions allowing employees to tap into their 401k plans early without paying penalties (still subject to taxation). This includes withdrawing up to $1,000 per year and avoiding the 10% penal­ty for people who have experienced a family or personal financial emergency.

4. Full Retirement Age

• January Social Security checks increase by 3.2%, due to the latest cost-of-living adjustment (COLA). This means Social Security recipients will receive on average $1,907 per month in 2024, up from $1,848 per month in 2023.
• If you are receiving survivors or spousal benefits, your benefits will also increase.
• In 2023, if you earned over $21,240 and were under your FRA all year, $1 for every $2 you earned was withheld; that number changes to $22,320 in 2024. In 2024, $1 for every $3 you earn over $56,520 is withheld, if you reach your FRA and hit that amount before your birthday.
• In 2024, the Social Security tax wage base is changing, so the government will only tax the first $168,600 you earn.
• The maximum Social Security benefit is climbing to $4,873 in 2024, up from $4,555 per month in 2023. However, only some seniors will qualify for this.

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