SECURE Act 2.0 in 2024: Retirement Changes You Need to Know

SECURE Act 2.0 in 2024: Retirement Changes You Need to Know

March 05, 2024

Hello, everybody! Welcome to my first blog entry since 2023. Alex and I are excited to continue to write to you all on a weekly basis in hopes that we can inform and maybe entertain you every week. I am happy to be back on the blog because there are quite a few changes that we feel we should be updating you on going into 2024. Every year it seems that there is a myriad of changes made to IRS tax code, retirement account contribution limits, and much more. These are the types of changes that we think all of our clients and readers should be aware of as they are budgeting for the year and continually adapting their financial plans. We have talked before about the SECURE ACT 2.0 that was passed into law in 2022. Many of the changes to retirement savings are coming into effect now this year. Without further ado, let’s jump into 3 2024 changes that you should take note of.


1. Changes to retirement account contribution limits


Contribution limits saw increases almost unilaterally in 2024. Since the IRS indexes these limits to inflation, changes happen very often and have occurred frequently the last few years. For many of you reading at home, there are a few changes specifically that will affect you and your retirement savings. The first change for 2024 is that IRA contributions are now limited to $7,000 up from $6,500 in 2023. This applies to both after-tax Roth IRAs and pre-tax Traditional IRAs. The catch-up provision for savers over the age of 50 did not change and is still $1,000. Similarly, you can also contribute more to your 401k this year! 401k contribution limits increased to $23,000 which is an increase of $500 from 2023’s top-end limit. Total 401k/403b contribution limits, when adding in employer contributions, increased to $69,000 for those under the age of 50 and $73,500 for those over the age of 50. These are both increases of $3,000 over last year’s limits. As you can see, these numbers are almost always changing. It can be easy to not realize that you have an opportunity to save even more this year. If you are able, make sure to consider changing your budget for the year to reflect these changes in contribution limits.


2. RMDs can wait…. For at least one more year


Required Minimum Distributions, RMDs for short, are withdrawals that you are required by the IRS to make from your pre-tax IRA and 401k accounts. This is a minimum dollar amount that you have to take out of your account annually once you reach a certain age. That age was 72 in 2023, but will move up to age 73 in 2024. While this is only a change of one year, it could still be of benefit to you. Many people don’t like taking RMDs from their pre-tax accounts if they don’t need the income. This will allow those people to delay those distributions for at least one more year. Previously there was also a 50% fee on your withdrawal amount if you did not take your RMD on time. This fee has been decreased to 25% thanks to the SECURE Act 2.0. If you have questions about calculating your RMD or if you need to take one, feel free to reach out to us. You can also access the IRA website for more information.


3. 529 plan rollovers to Roth IRAs


One of the most interesting changes brought about by the SECURE Act 2.0 in 2024 is the ability to rollover unused 529 plan assets into a Roth IRA account. There are many rules that come along with this. The 529 plan account must be open for at least 15 years while the amount you are rolling over most have been in the account for at least 5 years. You are limited in the rollover to the annual contribution limits for Roth IRAs which is $7,000 for those under the age of 50 in 2024. One of the key points here is that you can only roll assets over into a Roth IRA whose owner is the beneficiary of the 529 account where the money is coming from. One thought here is that this money could be used to jumpstart the retirement savings of someone who decided not to go to college or who didn’t need all of the money saved in the 529. An example would be a grandchild who did go to higher education, but had much of their tuition covered through academic scholarships. They didn’t end up needing to use all their money that their grandparents had saved for them in a 529 plan. Since the grandchild is the beneficiary, that money could be rolled over into a Roth IRA subject to annual limits. Up to $35,000 per beneficiary can be rolled over from a 529 to a Roth IRA over the lifetime of the 529 account.


Hopefully today’s blog brought to your attention some new opportunities that you didn’t even realize where happening. The opportunity to save more annually for retirement is one that I know many of our readers will want to take advantage of! The ability to rollover money from a 529 to a Roth is also new and will be something that many utilize in the future. Thanks again as always for listening and have a great week!


Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.