2024 Retirement Planning & Contribution Updates

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Financial Planning:

Each year there are a number of significant changes to contribution limits and retirement laws that can present unique opportunities for mid-career professionals. In 2024, these updates—ranging from increased contribution limits to innovative 401(k) options—can offer strategic avenues to enhance your financial stability as you approach retirement.

Maximizing Retirement Savings: Increased IRA and 401(k) Contribution Limits

One of the most notable changes is the increase in IRA and 401(k) contribution limits. The limit for annual contributions to an IRA has risen to $7,000, up from $6,500. For those aged 50 and over, the catch-up contribution remains at $1,000, bringing the total potential contribution to $8,000. Similarly, the contribution limits for 401(k) plans have seen an increase to $23,000, with a higher ceiling of $30,500 for those 50 and older. These increased limits are a boon for mid-career professionals, allowing them to accelerate their retirement savings and potentially enjoy a more comfortable and secure retirement.

I. Traditional and Roth IRA

Contribution limits for a traditional or Roth IRA increased last year, and the limits are going up again for 2024:

  • The limit on annual contributions to an IRA increased to $7,000 in 2024, up from $6,500.
  • Catch-up contributions for taxpayers 50 and older are subject to cost-of-living adjustments, but these limits remain unchanged for 2024 at $1,000 ($8,000 total).

Note: Not everyone can benefit from the higher IRA contribution limits in 2024. 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.

II. 401(k) and other employer-sponsored plans

Individuals can contribute more to their 401(k) plans and other employer-sponsored plans in 2024:

  • Contribution limits for employees who participate in 401k, 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, will increase to $23,000 in 2024, up from $22,500. 
  • Participants in 401k, 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan who are 50 and older, can contribute up to $30,500, starting in 2024.

More details on these and other retirement-related cost-of-living adjustments for 2024 can be found on the IRS site.

New Flexibility with 529 Plans Conversion to Roth IRAs

Another significant development is the flexibility offered by the Secure 2.0 Act regarding 529 plans. Parents can now roll over up to $35,000 from a 529 plan to a Roth IRA without facing income tax or penalties, under certain conditions, such as the plan being in existence for at least 15 years. This change is particularly beneficial for those who have saved for their child’s education but find themselves with excess funds due to scholarships or a change in educational plans. The ability to convert these savings into a Roth IRA can provide a substantial boost to your retirement nest egg, offering both tax advantages and a wider range of investment options.

  • 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 right away (or ever).

Introducing Starter 401(k) Plans: Simplifying Retirement Savings

The introduction of Starter 401(k) plans is another pivotal change. These plans are simplified, deferral-only retirement accounts with a $6,000 limit and an additional $1,000 catch-up contribution for individuals beginning at age 50. This new plan is an excellent option for employers who do not currently sponsor a retirement plan, making retirement savings more accessible and straightforward for their employees. For mid-career professionals, this represents an opportunity to diversify retirement savings strategies, particularly for those who may not have maximized their retirement contributions in the past.

Conclusion: Navigating Retirement Planning Changes in 2024

These changes in retirement planning for 2024 present a mixed bag of opportunities and considerations for mid-career professionals. The increased contribution limits for IRAs and 401(k)s enable you to accelerate your retirement savings, while the flexibility offered by the new rules for 529 plans provides an unexpected but welcome boost to your retirement funding options. The introduction of Starter 401(k) plans opens up new avenues for retirement savings, particularly for those in smaller companies or with more limited retirement plan options. Understanding the nuances of these changes and how they align with your personal financial goals is key to maximizing their benefits. As always, staying informed and adapting your retirement strategy in response to these changes is crucial for ensuring a financially secure and comfortable retirement.

At Colorado Wealth Group, we are always striving to keep our clients informed of the latest changes so we can rest assured their future plans are optimized. If this sounds like the type of partnership and guidance you’re looking for, let’s chat. Reserve a complimentary consult here or call the office directly (720) 729-2500. We look forward to meeting you.