As we usher in a new year, the financial landscape is undergoing several changes that can significantly impact your financial planning. As your trusted financial advisors at Alaska Wealth Advisors, we provide a comprehensive overview of the key changes that will shape your financial strategies in the coming year.
SOCIAL SECURITY 2024 COLA 3.2% – A CONSIDERABLE ADJUSTMENT
In the realm of Social Security, the Cost-of-Living Adjustment (COLA) for 2024 stands at a substantial 3.2%. This adjustment aligns with inflation rates, reflecting a prudent approach to maintaining the purchasing power of retirees’ income. Recipients should expect the increase reflected in their January payments.
MEDICARE MATTERS: PREMIUMS, DEDUCTIBLES, AND MORE
Medicare, a critical component of retirement planning, is subject to adjustments in 2024. Part B premiums are set to increase by 6%, accompanied by a modest rise in the annual deductible from $226 to $240. Meanwhile, Medicare Advantage premiums will experience a nominal average increase of $0.64, and Part D premiums are set to decrease by about a single dollar.
RETIREMENT PLANNING: ENHANCEMENTS AND CONSIDERATIONS
SECURE 2.0 Act of 2022 laid out a lot of changes, many of which are taking effect in 2024.
IRA Contributions: Up to $7,000
Individual Retirement Account (IRA) contribution limits have been raised to $7,000 (an increase of $500 from 2023), offering individuals an opportunity to save more for their retirement. Those aged 50 and above can further enhance their contributions with an additional $1,000 through catch-up provisions.
Under the Secure 2.0 Act, catch-up contributions will now be subject to inflation, except for the year 2024. We will keep you informed about these changes as you plan your contributions in the coming years.
As a reminder, you have until April 15, 2024, to make your 2023 contributions to your traditional and/or Roth IRAs.
Workplace Retirement Plans: Increased Contributions
Workplace retirement plans – such as 401(k), 403(b), and most 457 plans – are also undergoing adjustments. Contributions can be increased by $500, allowing those aged 50 and above to contribute up to $30,500 ($23,000 base contribution and $7,500 catch-up contributions), while others can contribute up to $23,000.
Anticipate a new, higher contribution cap for the 60-63 age group in 2025.
RMD Age: Remains 73, Bumping to 75 in 2033
The Required Minimum Distribution (RMD) age remains at 73, after it was raised in 2023, providing more flexibility for retirees. However, it’s important to note that this age will increase to 75 in 2033.
TAX DEDUCTIONS: REFINED STANDARDS FOR ENHANCED PLANNING
Taxpayers can look forward to increased standard deductions in 2024. For married couples, the deduction is $27,700, up from $25,900. Single or married filing separately individuals can now claim $13,850, up from $12,950. Head of household deductions have also increased to $20,800 from $19,400.
If you or your spouse is 65 or older, you qualify for additional deductions.
INNOVATIVE CHANGES IN 2024
While SECURE 2.0 Act ushered in many necessary updates to retirement provisions, there are a few stand-out provisions worth mentioning.
529-to-Roth IRA Rollovers
Beginning in 2024, unused funds in a 529 account can be seamlessly rolled over tax-free into a Roth IRA. This provision comes with specific criteria, requiring the 529 account to be active for a minimum of 15 years, with lifetime rollovers capped at $35,000.
Emergency Withdrawals and Special Provisions
In a bid to offer more flexibility, starting in 2024, individuals can make one withdrawal of $1,000 per year to cover personal and family emergency expenses without incurring the usual 10% penalty. Additionally, victims of domestic abuse under the age of 59½ gain access to penalty-free withdrawals of up to $10,000 from IRAs and 401(k)s.
IN THE END…
2024 introduces a host of nuanced financial adjustments, demanding our attention as prudent investors. As we navigate these changes, Alaska Wealth Advisors remains committed to providing astute guidance, ensuring your financial well-being is safeguarded through these evolving dynamics.
Vlad Finko
Associate Financial Advisor
The opinions expressed are those of Alaska Wealth Advisors Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Note: This material should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.
