Every tax year, the Internal Revenue Service makes changes to the tax code that impact taxpayers across the nation — including anyone saving for retirement.
Even if you haven’t filed your taxes for 2023 yet, it’s important to get up to date on the most recent tax code changes as soon as possible so you can continue to maximize your retirement savings.
Below, we’ll catch you up on the most recent changes made by the IRS that could impact your retirement plans for 2024.
Eliminate your late tax debt
Each year, the IRS forgives millions in unpaid taxes. If you have more than $10,000 in tax debt, or have 3+ years of unfiled taxes, you could get forgiveness too. You might be eligible to lower the amount you owe, or eliminate your tax debt completely.
Easy Tax Relief could help you lower or get out of your tax debt for good. They’re well respected in the industry and have been recognized for their ethical standards when dealing with tax debt. While most tax companies just put you on a payment plan and file your taxes for you, Easy Tax Relief talks to the IRS directly. They can help you pay off your tax debt faster while potentially reducing what you owe.
Important: Not everyone will qualify. To take advantage of this special program you must owe more than $10,000 in past-due taxes.
Maximum contribution amounts for 401(k)s have gone up
For the 2023 tax year, the maximum amount individuals could contribute to a 401(k) or Individual Retirement Account was $22,500.
This year — effective January 1, 2024 — retirement savers can put up to $23,000 in pre-tax dollars into their IRA.
403(b)s, most 457s, and Thrift Savings Plans maximum contributions have gone up
While 401(k)s are among the most common types of savings plans, they aren’t the only retirement savings options available.
You may have also been stashing money away in a 403(b), 457, or federal Thrift Savings Plan. If so, the same limit increase applies: You may contribute an extra $500 to your savings account this year compared to 2023.
Maximum Roth IRA contributions have increased
Unlike money saved in traditional IRAs, cash set aside for a Roth IRA is taxed preemptively rather than when you cash it out in retirement.
Contribution limits are different for Roth IRAs than traditional accounts, and the max contribution amount for Roths has gone up by 7.6% to a total of $7,000 for the year.
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Starter 401(k) plans are an option for small businesses that can’t afford to offer employee matches
Small-business owners can’t always afford to offer their employees 401(k) plans with employer matches. The IRA’s new starter 401(k) plan functions like a typical 401(k), but it doesn’t require employer matches.
Its limits are also lower: Employees may contribute up to $6,000 a year plus an extra $1,000 once they’re over age 50.
Students paying off federal student loans are eligible for employer 401(k) matches
Before this year, employees who were working on paying off their student loans needed to contribute to a 401(k) to qualify for any sort of employer match.
Thanks to new legislation, SECURE 2.0, as long as employees are paying off debt related to “qualified student loan payments,” (tuition, fees, books, and expenses) they may receive matching retirement contributions counted as “elective deferrals.”
The same rules that apply to a company’s 401(k) employer match now apply to student loan payments, giving student loan payers the chance to start saving money.
There is no longer a 10% penalty for early withdrawals if you’ve experienced a financial emergency
Up until this year, and with very few exceptions, anyone withdrawing money from a 401(k) account before age 59.5 would have to pay a 10% penalty (on top of paying the taxes associated with the account).
However, with the 2024 changes, individuals are allowed to withdraw up to $1,000 a year if they or their families have experienced a financial emergency within the last year.
Based on the new rules, you don’t have to pay the 10% penalty as long as you pay the money back to the account within three years.
The 10% penalty is also waived for domestic abuse survivors
If an individual self-certifies that they were a victim of domestic abuse, they may make a withdrawal without paying the 10% penalty.
The total amount that may be withdrawn is either up to $10,000 or 50% of the total amount of money in the account — whichever sum is smaller.
Bottom line
If you aren’t already maxing out your retirement savings contributions, the start of a new tax year — complete with new contribution limits — is the perfect time to start.
Remember, taking advantage of increased contribution limits is one of the essential retirement planning moves that can have a lasting impact on whether you’re able to retire early or not.
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