By Stephen J. Silverberg New York Elder Law Attorney
If your New Year’s resolutions included increasing your retirement savings efforts in 2024, there are a few changes to rules about IRAs, 401(k)s, and even 529 College Savings Plans you’ll want to know about.
Contribution limits for 2024 have gone up. Annual contributions for IRAS in 2024 are now $7,000, up from $6,500 in 2023. It applies to the total contributions to all traditional and Roth IRAs. For those 50 and older, the contribution limit is $8,000 because of the $1,000 “catch-up” contribution allowed for older savers.
401(k) annual contributions are now $23,000. It applies to similar employer-sponsored retirement accounts, including 403(b) plans, most 457 plans, and the Thrift Savings Plan for federal government workers. Older savers (50-plus) may contribute up to $30,500 this year to a 401(k), 403(b), and most 427 plans and Thrift Savings Plans.
Funds in a 529 college savingsaccount may now be rolled over into a Roth IRA for the beneficiary with no penalty. This tax-free rollover rule is part of SECURE 2.0. Individuals may roll over as much as $35,000 from 529 savings accounts, subject to annual Roth IRA limits. There are rules to follow: the account must be owned for at least 15 years before you can roll over the funds, and you may only roll over money that’s been in the account for at least five years. The account holder, typically a child’s parent or grandparent, may roll no money into their own Roth IRA – it can only go into an account established for the beneficiary of the 529 plan.
Rules aboutemergency withdrawals have changed. Previously, if you had an immediate financial emergency, you could get an early distribution from 401(k)s and IRAs. You’d have to pay income tax on the withdrawal, and if you were younger than 59 ½, you’d also get hit with a 10% penalty.
In 2024, you may make one withdrawal of $1,000 per year to pay for an emergency expense without owing the 10% penalty, as long as you “self-certify” that you need the money for an emergency.
There is another penalty-free withdrawal allowed to victims of domestic abuse under age 59 1/2, who may withdraw up to $10,000 from IRAs and 401(k)s.
“Starter 401(k)s” were introduced in 2024. These leaner plans have lower costs, fewer administrative burdens, and are designed specifically for small business employers. Employees may contribute up to $6,000 yearly, and small businesses have until tax time to set up the plans. The goal is to expand access to workplace retirement plans for people who work in small businesses.
About the Author
Stephen J. Silverberg is nationally recognized as a leader in the areas of estate planning, estate administration, asset preservation planning, and elder law. He is a past president of the prestigious National Academy of Elder Law Attorneys (NAELA), and a founding member and past president of the New York State chapter of NAELA.
Annual contributions for IRAS in 2024 are now $7,000, up from $6,500 in 2023. It applies to the total contributions to all traditional and Roth IRAs. For those 50 and older, the contribution limit is $8,000 because of the $1,000 “catch-up” contribution allowed for older savers.
For 2024, the IRA contribution limit is $7,000 for those under 50. Those 50 and older can contribute an extra $1,000 for a total of $8,000. The contribution limit doesn't apply to transfers from other retirement accounts, such as those used to create a rollover IRA.
But there are SECURE Act 2.0 changes in 2024 that will expand what the IRS accepts as penalty-free withdrawals. Emergency expenses. The IRS could allow a withdrawal of up to $1,000 to be exempt from the 10% tax penalty if it's for an unexpected and immediate financial need.
The SECURE Act 2.0 increases the age at which individuals are required to begin taking RMDs from their retirement accounts. Starting in 2024, the RMD age will be raised from 72 to 73, and further to 75 in 2033.
What is the Secure 2.0 Act? The Secure 2.0 Act is a federal measure passed in late 2022 to encourage Americans to save for retirement. Among the many changes it makes to retirement policy, the new law pushes back the required minimum distribution age for individual retirement accounts, or IRAs.
Under the SECURE Act 2.0, employers can give you permission to take an annual distribution of up to $1,000 to cover a personal emergency with immediate need. However, you must repay the amount before you can take any further emergency distributions for future years.
Another option, if your employer's plan offers it, is the mega backdoor Roth. Under this option you would make after-tax contributions into your employer's 401(k) plan. For 2024 the limit for these after-tax contributions is $46,000.
The SECURE Act eliminated the "stretch IRA" for most nonspouse beneficiaries. With the stretch IRA, it was possible to use your life expectancy to minimize IRA withdrawals over time. This strategy allowed beneficiaries to shelter a large portion of the inheritance from taxes.
In the final days of 2022, the SECURE 2.0 Retirement Savings Act (aka "SECURE Act 2.0") was signed into law, expanding the SECURE Act of 2019 and further strengthening the retirement system.
“This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest. Retirement investors can now trust that their investment advice provider is working in their best interest and helping to make unbiased decisions.”
A general rule of thumb says it's safe to stop saving and start spending once you are debt-free, and your retirement income from Social Security, pension, retirement accounts, etc. can cover your expenses and inflation. Of course, this approach only works if you don't go overboard with your spending.
Highlights of changes for 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan is increased to $23,000, up from $22,500. The limit on annual contributions to an IRA increased to $7,000, up from $6,500.
Neal (D-MA) introduced the Automatic IRA Act of 2024 to dramatically expand retirement coverage for millions of workers. The legislation unlocks a key retirement savings vehicle for employees, gig workers, and other independent contractors nationwide.
Limits for 401k, 403b, most 457 plans and the federal government's Thrift Savings Plan, will bump up from $22,500 to $23,000. Employees with these accounts who are aged 50 or older can contribute up to $30,500 to their accounts in 2024. Check out the IRS site to read the full scoop on these changes.
The Roth IRA contribution limit for 2024 is $7,000 for those under 50 and up to $8,000 for those 50 or older. The cap applies to contributions made across all IRAs you might have.
So how do you calculate your RMD for a given year? By dividing the value of each retirement account at the end of the previous year by the distribution period based on what your age will be in the year you take the RMD.
Generally, unless you meet the criteria for an exception, the IRS penalizes withdrawals before age 59 1/2 with a 10% fee. So, if you withdraw $10,000 before that age, you could owe the government $1,000 for accessing your money early, in addition to state and local income taxes.
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