2024 Tax Year Updates
I hope you all had a wonderful holiday season. With the new year upon us, 2024 will usher in more changes than usual on the retirement-planning front. In addition, the retirement legislation known as Secure 2.0 will continue to phase in, with implications for retirement savers and retirees alike.
Here is a topline summary of retirement-related changes going into effect in 2024, as well as any planning-related moves to consider. There is additional detail corresponding to these subjects in the attached summary of annual limits.
Higher Contribution Limits for Retirement Savings
Contribution limits to retirement accounts are increasing for 2024. Company retirement plan contributions—whether 401(k), 403(b), or 457—are going up to $23,000 for people under age 50 and $30,500 for workers who are 50-plus.
IRA contribution limits are going up to $7,000 for people under 50 and $8,000 for people who are 50-plus.
The total 401(k) contribution limit (employee deferral + employer contributions) is $69,000, plus an additional $7,500 for workers 50-plus.
Health Savings Accounts
Contributions to health savings accounts, which can be employed as stealth retirement accounts, are increasing as well, to $4,150 for people covered by an individual high-deductible health plan and $8,300 for people with family HDHP coverage. HSA savers who are 55 and older can contribute an additional $1,000.
Higher Qualified Charitable Distribution Limit
People over the age 70.5 can contribute $105,000 to charity via the qualified charitable distribution, or QCD, in 2024. While the QCD limit had been stuck at $100,000 for a number of years, Secure 2.0 indexed the limit to inflation. Secure 2.0 opened the door for people to use a charitable gift annuity.
529 Rollover to Roth IRA
Unused 529 assets now can rollover to a Roth IRA. Provided a 529 beneficiary has owned the 529 for at least 15 years, up to $35,000 can be rolled into a Roth IRA, subject to the beneficiary’s annual IRA income contribution limits.
The $35,000 is a lifetime limit, meaning that someone under age 50 with $35,000 in unused 529 assets could roll over $7,000 per year (today’s contribution limit) over a five-year period.
The ability to roll over unused 529 assets to a Roth IRA is a solution in situations when the beneficiary received a scholarship or didn’t go to college. This new feature can help alleviate parental worries about over-saving in a 529.
No Required Minimum Distributions on Roth 401(k)s
Roth 401(k)s will no longer be subject to required minimum distributions starting in 2024, which puts them on an equal footing with Roth IRAs.
Higher Tax Brackets
As outlined on the attached supplemental summary, income limits for tax brackets will be increasing in 2024. These changes affect the income thresholds for both income and capital gains taxes.
As always, if you have any questions or concerns about how any of these changes affect your personal situation and plan, please contact us and we would be happy to discuss.