5 New Breaks to Boost Your Retirement Savings in 2024

Introduction:

The dawn of a new year often brings with it a renewed focus on financial goals. As we step into 2024, there are exciting changes in retirement plans that can significantly impact your ability to save for retirement, tackle emergencies, and even manage student debt. Thanks to the SECURE Act 2.0, passed by Congress at the end of 2022, several key modifications have been introduced to enhance the American retirement system.

In this comprehensive blog post, we will explore five new breaks that could help boost your retirement savings and improve your overall financial well-being.

1. Emergency Savings in a Workplace Plan: One of the standout features of the SECURE Act 2.0 is the provision allowing employers to add an emergency savings account to defined contribution retirement plans. This is a game-changer for those looking to bolster their financial safety nets. The Roth-designated accounts, capped at $2,500 annually, offer penalty-free access to funds for non-highly compensated employees. We’ll delve into the details of how these accounts work, potential employer matches, and alternative out-of-plan options like the Fidelity Goal Booster℠.
2. Higher Catch-Up Contributions for Older Workers: For the 2024 tax year, catch-up contributions to IRAs are now indexed to inflation. This means that individuals aged 50 and older can contribute an additional $1,000 on top of the standard limit, with adjustments for inflation ensuring that catch-up contributions keep pace with the cost of living. The catch-up limits for 401(k)s will see a significant jump in 2025, benefiting individuals aged 60 through 63. We’ll explore how these changes empower older workers to supercharge their retirement savings.
3. No Required Minimum Distributions (RMDs) from a Workplace Roth: The elimination of RMDs from workplace Roth plans is a significant departure from the previous norm. Now, individuals reaching RMD age in 2024 or later can let their savings continue growing without mandatory withdrawals. We’ll break down the implications of this change and compare it to traditional retirement plans where RMDs are still obligatory.
4. Student Loan Matching in a Workplace Plan: With student loan repayments resuming after a pandemic-induced pause, the inclusion of matching for student loan payments in workplace retirement plans is a welcome relief for millions of individuals with student debt. We’ll examine the eligibility criteria, how to certify annual student loan payments, and the potential impact on retirement savings.
5. 529-to-Roth IRA Transfers: For those with beneficiaries holding 529 accounts, a new opportunity arises to transfer funds tax- and penalty-free to a Roth IRA. This strategy, effective from January 1, 2024, comes with certain conditions, including maintaining the 529 account for at least 15 years. We’ll analyze the intricacies of this transfer, potential limitations, and the anticipated guidance from the IRS.

Conclusion:

The changes brought about by the SECURE Act 2.0 offer exciting prospects for individuals looking to enhance their retirement savings, manage emergencies, and navigate student debt. Whether you’re considering emergency savings within a retirement plan, exploring catch-up contributions, enjoying the flexibility of RMD-free workplace Roth plans, taking advantage of student loan matching, or contemplating 529-to-Roth IRA transfers, it’s crucial to consult with a financial or tax professional. With a solid financial plan in place, you can embark on 2024 with confidence, knowing that you’re making the most of these new breaks to secure your financial future.