As we step into a new year, it’s essential to stay up to date on changes that could impact your financial plan. If you’re eyeing retirement, 2024 brings some noteworthy adjustments that could shape the way you approach your golden years. Here are the key retirement changes for 2024 and how they might influence your financial strategy.
IRA and 401(k) Contribution Limits Increase. One of the most significant changes for retirement savers in 2024 is the increase in contribution limits for Individual Retirement Accounts (IRAs) and 401(k) plans. The IRS has raised the annual contribution limits to accommodate the rising cost of living and to help individuals save more for their retirement.
- For 2024, the new limit for IRA contributions is $7,000, up from $6,500 in the previous year. This change allows individuals aged 50 and older to make catch-up contributions of up to $1,000, providing an excellent opportunity for those nearing retirement to increase their savings.
- Similarly, the maximum contribution limit for 401(k) plans has been raised to $23,000, with an additional $7,500 allowed for catch-up contributions for individuals aged 50 and older. These increased limits offer individuals a chance to turbocharge their retirement savings and take advantage of the power of compounding over time.
Starter 401(k) Plans are on the Horizon. Recognizing the need to make retirement savings more accessible, 2024 brings the introduction of Starter 401(k) plans. These plans aim to simplify the retirement savings process, particularly for small businesses and self-employed individuals who may not have had access to traditional 401(k) plans.
Starter 401(k) plans come with reduced administrative burdens and lower costs, making it easier for employers to offer retirement benefits to their employees.
Full Retirement Age (FRA) Updates. The Full Retirement Age (FRA) is the age at which individuals can claim their full Social Security retirement benefits. In 2024, there have been updates to the FRA, affecting the timing of Social Security payouts for future retirees.
While the FRA was previously set at 67, there will be a gradual increase over the next few years. Individuals born in 1960 or later will now have a FRA of 67 years and 2 months. It’s important to consider these changes when planning the timing of your Social Security benefits, as claiming early or delaying can impact the amount you receive each month.
As we embrace the new retirement changes for 2024, it’s essential to reassess and adjust your financial plans accordingly. The increased contribution limits for IRAs and 401(k)s provide an opportunity to supercharge your retirement savings, while Starter 401(k) plans aim to make these benefits more accessible for a broader population.
Additionally, staying informed about the changes to the Full Retirement Age is crucial for those planning to rely on Social Security as part of your retirement income. By staying proactive and adapting our financial strategies to these new developments, you can navigate retirement with greater confidence and security. Remember, the key to a successful retirement is thoughtful planning and staying abreast of the evolving landscape of retirement regulations and opportunities.
Blog by: Aaron Waters, Wealth Advisor & Shareholder
Category: Financial Service Team
