Navigating the 2024 Retirement Landscape: A Comprehensive Guide

2024 Cost of Living adjustment of 3.2 percent kicks for some as early as December 29th, 2023. This is a modest increase in comparison to last year's 8.7 percent increase1.

Starting from 2024, the standard premiums for Medicare Part B will increase by 6 percent, from $164.90 to $174.70 per month, after a 3 percent decrease in 2023. Most Medicare beneficiaries have their premium payments for Part B deducted directly from their Social Security payments. Therefore, this premium increase will reduce the COLA benefit boost by $9.80 per month for this group. Additionally, the annual deductible for Part B will also increase from $226 to $240.

On the other hand, Medicare enrollees who have Medicare Advantage (MA) coverage or Medicare Part D prescription drug plans will not see significant changes in their payments. Since these plans are provided by private insurers, costs vary. However, as per Medicare officials' estimates, the average monthly premium for an MA plan will only increase by 64 cents, from $17.86 to $18.50, and most enrollees will not experience any increase. Moreover, Part D plans will cost an average of $55.50 per month, which is slightly lower than the 2023 average of $56.49.

Under the new law, employers have the option to make matching contributions to employees’ 401(k)s if the employee makes qualifying student loan payments during the year1. This could be a useful tool for companies to attract top talent while allowing cash-strapped employees to save for their futures, but it is not required that the employer offer this benefit, so employees in a 401k plan should check with their employers.

Families may now roll over excess 529 plan funds to a Roth IRA in the beneficiary’s name. However, they must adhere to specific rules, including a lifetime maximum rollover amount of $35,000 and not more than the annual contribution limit each year*.

Beginning in 2024, there will be a new exception to the 10 percent early withdrawal penalty for taking money out of your tax-deferred retirement accounts before you’re 59 1/21. You may withdraw up to $1,000 to cover unforeseen or immediate financial needs*.

Domestic abuse survivors may withdraw up to the lesser of $10,000, indexed for inflation, or 50% of their retirement account balance to help them escape their unsafe situation1. These withdrawals are not subject to the 10 percent early withdrawal penalty.

RMD calculations are out, and account owners required to take distributions have until the end of the calendar year to take their distributions. An investor's first RMD must be taken by April 1st of the year after they turn 73. So, if you turned 73 on December 31st, 2023, then you must take your first RMD by December 31st, 2024. However, if you turned 73 on January 1st, 2024, then your first RMD is not due until April 1st, 2025. The penalty for not taking your RMD in time is 25 percent of the amount by which your withdrawal fell short of the required minimum.

Investors may benefit from a "ROTH Conversion" and should discuss this technique with their financial advisor and tax advisor. Whether a ROTH conversion makes sense depends heavily on the investment time horizon of the investor.

Charitable Investors could benefit by directing up to $100,000 of their RMDs to a qualified charity. This avoids this portion of the RMD being subject to income tax.

SEP IRA contribution limits increased. Self-employed investors can contribute up to 25 percent of the employee's total compensation or a maximum of $66,000 for the 2023 tax year or $69,000 for the 2024 tax year, whichever is less into a Simplified Employee Pension (SEP) IRA. Investors may qualify to contribute to both a SEP IRA and an IRA (ROTH and/or Traditional) but consult with your tax advisor to be certain.

The maximum annual traditional IRA contribution limit is $7,000 in 2024 up from $6500 in 2023 (those aged 50 or older may make an additional $1,000 contribution). Investors have up to the tax deadline (April 15th, 2024) to make their 2023 contributions and until April 15th, 2025 to make their 2024 contributions. Traditional IRA contributions may be tax-deductible in the year they are made, depending on one’s modified gross income (MAGI) and whether they are covered by an employer-sponsored retirement plan. Investments within the account grow tax-deferred, but withdrawals in retirement are taxed as ordinary income**.

This tool by Fidelity*** is useful in assessing if an investor should select a traditional or ROTH IRA. This tool does not contemplate whether your participation in an employer-sponsored plan will affect the tax deductibility of contributions. Consult your tax advisor for guidance on your specific situation.

401k contribution limits increased from $22,500 in 2023 to $23,000 in 2024. Those aged 50 or older may contribute $30,000 for 2023 and $30,500 for 2024.