Tax and Retirement Plan Changes in 2024: Everything You Need to Know
What is the SECURE Act?
The SECURE Act, or Setting Every Community Up for Retirement Enhancement Act, is a piece of U.S. legislation signed into law on December 20, 2019. This act aims to make it easier for individuals to save for retirement by providing incentives for employers to offer retirement plans to their employees.
2024 Key Provisions:
1. RMD starting age increases from 72 to 73
The required beginning date for distributions from employer-sponsored retirement plans, SEP IRAs, SIMPLE IRAs, SARSEPs, and Traditional IRAs has increased to age 73 in the tax year 2023, and to age 75 in the tax year 2033.
2. IRA Catch-Up Contributions will be indexed for inflation
Currently, the limit for an IRA catch-up contribution for age 50 and above is $1,000 and will be indexed to inflation beginning in 2024. Overall, this update will have a greater impact on those who can fully contribute for many years between the age of 50 and retirement, especially in a high-inflation environment.
3. Unused 529 plan funds eligible for transfer to Roth IRA
Starting in 2024, the SECURE Act 2.0 will enable individuals to transfer money from a 529 account to a Roth IRA without facing any tax or penalty. The major limitation is the 529 plan would have to have been established for at least 15 years to be eligible for this benefit. We believe the rationale for this time limitation is to dissuade people from contributing to 529 plans as a Roth-funding workaround and to truly limit it to funds that remain after educational expenses have passed.
This also further emphasizes the basic planning strategy to start 529 plans as early as possible, not only for the compounding benefits but also to take advantage of this Roth-conversion rule.
It is important to stay updated on the newly effective legislation each year to take advantage of financial opportunities, with over 90 provisions being phased in over the next decade!
At Compass Wealth Management, we work directly with clients to accomplish their financial goals while continuously staying up-to-date on leading industry updates.
Have additional questions or want to speak with our team directly? Contact us.
Robert Amato, CFP®, CIMA®
Principal
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Source:
- CFP Board (2024). Key Elements Secure 2.0 Act 2022, Provisions Effective January 1, 2024, Impact | Considerations | Learning Objectives for the CFP Certification Examination