As 2024 unfolds, it’s essential to stay updated on new regulations affecting retirement savings. Here are three important updates to consider this year:
- Enhanced Contribution Limits:
- 401(k), 403(b), 457 Plans, and Thrift Savings Plan: The contribution limit for these plans has increased by $500, raising it from $22,500 to $23,000. Individuals aged 50 and over can continue to make additional catch-up contributions of $7,500 per year.
- Traditional IRA: The annual contribution limit has been boosted by $500, now set at $7,000. Those aged 50 and older can contribute an additional $1,000.
- Roth IRA: The income eligibility thresholds for contributing to a Roth IRA have increased, depending on your tax-filing status.
- Health Savings Account (HSA): Contribution limits have been raised to $4,150 for individual coverage and $8,300 for family coverage. Individuals aged 55 and older can contribute an extra $1,000.
- Adjusted Withdrawal Rules and Penalties:
- Emergency Withdrawals: New rules allow for penalty-free withdrawals up to $1,000 from a traditional IRA for personal or family emergencies.
- Medical Expenses: Withdrawals for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income can now be made without incurring the 10% early withdrawal penalty, limited to the cost of the expenses.
- Other Qualifying Expenses: Early withdrawals for higher education expenses, first-time home purchases (up to a lifetime limit of $10,000), and certain expenses for military reservists called to active duty are also penalty-free. Remember, standard income tax applies to these withdrawals from a traditional IRA.
- New Timeline for Required Minimum Distributions (RMDs):
- RMD Age Adjustment: The starting age for required minimum distributions from tax-advantaged retirement accounts has been raised from 72 to 73. Delaying RMDs may have tax implications, so it is advisable to consult with a tax or wealth advisor to plan appropriately.
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Conclusion: These regulatory changes in 2024 offer new avenues and considerations for your retirement planning. It’s advisable to review these updates with a financial advisor to ensure your retirement strategy aligns with your goals and takes advantage of the new limits and rules. For personalized advice, always consult with your financial advisor.