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Important Numbers to Know in 2024 · Retirement Answers

• 0:01
  Jacob: I wanted to share some important numbers that I think you should know about before we head into 2024. Now to preface this, just know that these are not all of the numbers you need to know. This is not comprehensive, and there's a reason for that. Welcome to Retirement Answers, a podcast built to answer your most pressing retirement questions. If you're someone who's either thinking about retirement or already in retirement, well, you're in the right place.
• 0:26
  Hey there, my name is Jacob Duke, and each week I'll be walking through different tips and strategies to help you succeed in retirement. So let's go ahead and get started with today's show. Hey, friends, and welcome back to another episode of Retirement Answers. It is the day after Christmas, wanted so to wish you a Merry Christmas one final time. I hope you had a great time with friends or family, or just however you celebrate Christmas.
• 0:52
  But with that, you know, new year is right around the corner. In fact, this is the last Tuesday of twenty twenty three, which means this is the last time we're gonna talk before we are talking in 2024. So today, because of that, I wanted to share some important numbers that I think you should know about before we head into 2024. Things like income limits for Roth IRA contribution eligibility, how much you can make contributions to your IRAs or Roth IRAs, four zero one ks contribution increases, and much more. Now, also on top of that, I wanna remind you about some Secure Act 2.0 changes that are gonna be taking effect here in 2024, even though the Secure Act was actually passed at the end of twenty twenty two, some of the rules are not being applied until this year in 2024.
• 1:34
  Now there is an important rule that is not actually applying this year in 2024, it's gonna apply in 2026 because that was postponed. So I'm gonna remind you about that quickly. Now, before we jump into this episode, I wanted to remind you about the listener survey I'd love for you to complete for me. The survey, it's gonna help me improve the show based on your feedback. So there's a link down in the description below, and it only takes a couple of minutes to complete, and I'd really appreciate it if you can do that for me.
• 2:00
  So I'm gonna be taking this survey down on December 31. So this is your last week to share how I can make the show better for you in 2024. So take just a couple minutes, fill that out for me, I would really appreciate it. And with that, I wanna make sure that we highlight this week's listen review. And this week's review comes in from Ian Faucette.
• 2:19
  He gives the show five stars and he says a very informative podcast. I love these podcasts. I find them very informative and I appreciate the way that Jacob explains financial concepts in a very simple, straightforward manner. I also like the topics he covers as I find them very applicable to my life. So, thank you so much for that review.
• 2:37
  Now I know who actually left this review because he and I have talked back and forth, we've exchanged emails, and I've been able to help answer some of his questions and we're just having a good dialogue. And that's what's actually fun for me about this. I enjoy getting to hear your questions, love to talk back and forth with you and hear some of the things that you're concerned about or what I could do better here on the show. So if you have questions or if you're interested in learning more about what I do for my clients, please do reach out. There's a link down in the description below to schedule a quick call with me and there my email is listed below as well.
• 3:07
  So, it's completely free. Just take advantage of that. I want to make sure that we have an open dialogue here and I can connect with you. So with that, let's go ahead and jump into this week's episode talking about the numbers that I think that you need to know here in 2024. Now to preface this, just know that these are not all of the numbers you need to know.
• 3:26
  This is not comprehensive and there's a reason for that. I did not wanna sit here and just explain to you, hey, the 10% bracket went from this dollar amount to this dollar amount or the 12% bracket was increased by $500 to this dollar amount. That's not helpful, don't think. And you probably don't wanna listen to that. So instead of just me spouting off a ton of different numbers and taxes and percentages, I was thinking, well, what if I just send you a copy of a cheat sheet that'll have all these numbers included so you can refer to that throughout the full year of 2024.
• 3:54
  And so what I wanted to do is offer you the opportunity to reach out to me, send me an email and say, Hey, Jacob, I'd love a copy of that cheat sheet. So that's what you can do once the episodes over, go down in the description below, shoot me an email saying, Hey, Jacob, I want a copy of the cheat sheet. And that'll have all of the information that you would need to know. So today though, we're just gonna cover some of the important things from contribution limit standpoint, and I wanted to start with employer retirement plan contribution limits and how much they're gonna be increasing in 2024. So this is gonna be things like 401ks, 403Bs, TSPs, 457s, anything that is an employer retirement plan.
• 4:29
  That's what we're gonna be talking about here. But the contribution limit, meaning how much you can contribute if you're under age 50 in 2024 is $23,000 Now this is an increase of $500 from 22,500 here in 2023. So that's gonna be going up to 23,000. Additionally, the catch up contribution for those who are 50 or older, they can make an additional $7,500 contribution on top of that 23,000. So the catch up contribution has not increased, that's staying the same, but the normal contribution limit is gonna increase by $500 So what does that mean?
• 5:05
  Well, you can make adjustments to how much you're saving, especially if you're maxing out your four zero one ks's or your employer retirement plan, you can make the adjustment before the year starts so that your monthly or your per check amount that you're contributing to that account is accurate based on how much you're wanting to put into it. So that's the first thing employer retirement plans going up by $500 now. Also the defined contribution plan like total limit is increasing to $69,000 So that means your contributions in addition to any employer contributions such as matches or profit sharing dollar amounts, that is gonna be a total maximum of $69,000 Now that's actually the maximum if you're under age 50. If you're over age 50, then your catch up contribution of $7,500 actually goes on top of the 69,000 to be 76,500. That's the new total maximum amount that you can have go into your employer retirement plan if you're over age 50.
• 6:05
  So obviously you'll be putting 30,500 in yourself And then anything above that could be an employer match that's going on top of that to be a total maximum of 76,500. So that's what you need to know in regards to employer contributions for 2024. Now, sometimes people are wondering, hey, what if I make too much money? Am I still able to contribute to an employer retirement plan? And the answer is yes.
• 6:28
  There's no income eligibility or income restrictions to be able to contribute to employer plan such as a four zero one ks or a TSP or a four zero three B. Now, there are income eligibility rules whenever you're talking about a Roth IRA or a traditional IRA. So we're gonna talk about that in just a second, but first I wanted to update you on the new IRA contribution amount changes for 2024. So this year in 2023, if you're under age 50, it is $6,500 in 2024, the Roth IRA and traditional IRA contribution limit is gonna be 7,000. So it's increasing by $500 In addition to that, the ketchup contribution is $1,000 and that's gonna remain the same year over year.
• 7:08
  So no changes on the ketchup contribution amount. And that brings the limit if you're over age 50 to 8,000 and if you're under 50, it is 7,000. So that's the main thing to know in regards to changes to the contribution amounts or contribution limits for IRAs. But just like I mentioned a second ago, unlike employer plans, IRAs actually have eligibility rules, whether you're trying to contribute to a Roth IRA, or you're trying to contribute to a traditional IRA. So I've talked about this previously in other episodes, wanted to kind of give you a quick reminder on that to make sure that we're doing it the right way.
• 7:39
  So if you earn too much money, you might not be able to contribute to a Roth IRA which is really the only reason that we have what we call a backdoor Roth IRA. So in order to contribute to a Roth IRA directly in 2024, here are the income limits you need to know about. Now, I'm gonna use the single phase out first, and I'm gonna talk about the married filing jointly second. So if you're single and your modified adjusted gross income, it's under 146,000, you can contribute to a Roth IRA directly without having to do a backdoor or anything else. Now there's a phase out range that's that's always involved here.
• 8:12
  So if you earn 146, you're in the clear, but if you earn 146 to 161, a percentage of that total contribution amount is going to be reduced and so you're reducing how much you can actually contribute. Now, once you reach that 161 of total modified adjusted gross income as a single filer, that means you cannot contribute at all directly to a Roth IRA. That's whenever you'd have to do the backdoor. Now, I'm not gonna talk about the backdoor, but just know if you're earning more than 161 as a single tax filer, that means you're gonna have to do a backdoor in order to get any money into a Roth IRA. Now for married filing jointly, the phase out range is a lot higher.
• 8:48
  It starts at $2.30 and it goes to $240,000. So if you're married filing jointly and your income is under 230,000 modified adjusted gross income, then you don't have anything to worry about, each both you and your spouse can contribute to a Roth IRA without any question. Now, as soon as you go over $2.30, and if you're in the range of $2.30 to $2.40, there's that phase out range, so your income limit or your contribution limit will be reduced down from the maximum amount. And as soon as you go over 240,000 of a combined income there, married filing jointly, you cannot contribute directly to a Roth IRA. That's whenever you would have to do the backdoor.
• 9:23
  So those are the Roth IRA income eligibility limits and phase out ranges for 2024. Now, a lot of people are actually unaware that on traditional IRAs, in order to deduct your contributions, you have to be under a certain income limit as well. Most of us think, hey, we can contribute to a traditional IRA no matter what our income is, therefore we can just deduct that when make that contribution, and that's not true. Hey, this is Jacob here. Wanted to interject really quickly and make sure that I was clear on what I'm trying to get across here.
• 9:51
  The deductibility rules for your traditional IRA are only applicable if you are covered by an employer plan. So if you, as a single person, do not have an employer sponsored four zero one k or retirement plan, there are no income limits for being able to deduct your IRA contributions. Now we're gonna get into the rules for spouses here in a second, but just know that if neither spouse is covered by an employer plan and work, then there are no income limits for deductibility on IRA contribution. So I just wanted to clarify that really quickly if there was any confusion, but let's get back to the episode. So yes, you can make a contribution at any point to a traditional IRA, but whether or not that contribution is deductible, that's really the question here.
• 10:28
  So I'm gonna walk through the phase out ranges here for single folks and married filing jointly, and let you know if you are covered by a work plan, meaning you have access to use a four zero one ks, a TSP, a four zero three b or any any sort of employer retirement plan. If you're covered by that type of plan, and you're trying to contribute to a traditional IRA and deduct that contribution, here are the income limits or the phase out ranges for a single person. If you earn less than $77,000, you can contribute to that traditional IRA and deduct the contribution, and then also still be able to make, you know, normal four zero one k contributions like normal. As soon as you go over 77 and in the range of 77,000 to 87,000, that's whenever a portion of your annual limit is not gonna be deductible anymore. So depending on where you fall in that range, really determines how much of your contribution is deductible.
• 11:18
  And as soon as you're over $87,000 as a single filer, you cannot make a deductible contribution to a traditional IRA if remember you're covered by a work retirement plan. Now for married filing jointly, that phase out range is a little bit higher. I'm gonna walk through that in a second, but married filing jointly is a little bit more confusing because there's two kinds of different phase out ranges here depending on who you are in that relationship. So if you are married filing jointly and you're the person that's covered by a work plan, your phase out range is 123,000 to 143,000. So if you earn more than 143,000 married filing jointly, then you cannot make a deductible contribution to an IRA because you're covered by an employer plan.
• 12:00
  Now, if you're a spouse of someone who is covered by an employer plan, and let's say that you're not, whether you're working and you're not covered by an employer plan or you're you're not working in that case, you obviously would not be covered by an employer work or retirement plan. The the the income limits or the phase out ranges for that spouse who's not covered is 230,000 to $2.40. So think of it this way, if you've got a couple who makes a $180,000 and one spouse is covered by a work plan and another is not, the one who is not can make a tax deductible IRA contribution, but the one who is covered by the employer retirement plan cannot make a tax deductible contribution to a traditional IRA. Now, if you're both covered by an employer retirement plan, then both of you would follow that that first phase out range I mentioned of 123 to 143 because you'd both be covered. And remember, this is kind of all confusing.
• 12:50
  So I'm gonna this all be included in the handout and the cheat sheet that I'm gonna be sending to you. So be sure to remember, reach out to me and ask me for that because it'll be a lot more clear for you there. Now, here's a couple other things really quickly before we jump into some of the Secure Act two point o changes in 2024. HSA contributions have increased just a little bit here in 2024. And if you're a single person or the coverage is individual, then your contribution limit is 4,150.
• 13:16
  If you're family, then it's 8,300. And if you're above 55, the catch up contributions for that is $1,000 Also wanted to let you know that the annual gift tax exclusion has increased to $18,000 for 2024. So that means you can gift up to that amount per year, per person, and those gifts are not gonna be reducing your lifetime estate tax exemption, which is now over 13,000,000. So obviously that estate tax exemption amount can be changing with legislation over time, but just know that if you gift up to $18,000 and don't do more than that to, each person that you're gifting money to, that amount is not gonna be subtracted from your lifetime exemption. So that's really for those with really high assets and maybe really high incomes that you're kind of looking at, hey, should I be using this gift tax exclusion every year?
• 14:05
  But just know in 2024, it's $18,000 and the total lifetime estate tax exemption is now over 13,000,000. Also in 2024, I mentioned this in a couple episodes back about Medicare, but part b premiums have increased slightly, and those are gonna be $174.70 per month. And that's the normal base rate. If you are making too much money, then what's called IRMA, income related monthly adjustment amounts, will be applied to your Part B premium, and I'm not gonna walk through the increases there, it's gonna be on the cheat sheet, so remember, reach out to me for that. But if your income is more than those amounts, that means that that you're gonna have to pay an additional surcharge on those premiums.
• 14:44
  Just know the base premium in 2024 for part B is $174.70. Now, one reminder really quickly for Medicare IRMA surcharges. Just know that that surcharge is not based on how much money you earn in 2024, it's actually based on how much money you made in 2022. So if your income was under that amount in 2022, that's really what it's being based on. So basically think two years previous, whatever your income was then, that's what determines if you have to pay IRMA this year on your Medicare premium.
• 15:16
  So, like I said, that's a lot of info and that's really the important numbers that I wanted to share with you, because that's really kind of what applies to you as someone who's either thinking about retirement or maybe already retired or kind of in that 50 plus range. But go ahead, email me, I'll send you that cheat sheet so you can see all of this and really get a good idea of what has changed and how these numbers differ from 2023 to 2024. So remember to email me to get that. Now, before I let you go, I wanted to remind you of some important Secure Act 2.0 changes that are gonna be taking place in 2024. And the Secure Act 2.0 was actually passed at the end of twenty twenty two.
• 15:50
  So most of the changes were applied here in 2023, but some have been delayed until 2024. And in fact, one of the big ones is actually gonna be delayed until 2026. So I'm gonna tell you about that one first. The catch up contribution change for 2024 was supposed to be that if you earn more than $145,000 last year, and you're making catch up contributions, those contributions would have to have been made to the Roth portion of the four zero one ks. So basically, would be forced to pay the income taxes on that money and have that put into the Roth side of your four zero one ks.
• 16:23
  Now that was the big change that a lot of people were kind of worried about here in 2024 is if you earn more than 145 last year, that means that you're gonna have to put any catch up contributions into the Roth side of your four zero one ks, which means you're gonna have to pay the income tax on it. So basically a tax bill for you would be created. Now, some of the issues there were that employers were like, hey, we can't get these changes implemented immediately because there were gonna be repercussions for those who didn't have a Roth portion of their four zero one ks available to their employees. And so what would happen there is if they didn't have a Roth portion of their plan available, then all of the employees would be negatively affected. So because of that, the IRS has said, okay, we're gonna put a pause on this for 2024 and we're gonna actually make this applicable to set to start in 2026.
• 17:10
  So we've got two more years before this actually starts being applied, but just know this is gonna happen. It's gonna be something here in the near future where you, if you're earning too much money, you might have to put all of your catch up contributions into the Roth side of your four zero one ks, meaning you're gonna have to pay the income tax to get it in. Another secure act change in 2024 that's gonna take place is that there are gonna be no more required minimum distributions or RMDs for Roth four zero one ks's. Most of us know that the Roth IRA never has a lifetime RMD like a traditional IRA does, but employer plans, regardless of where the money is, whether it be a traditional four zero one ks or in the Roth side of that four zero one ks, those have always had RMDs. So beginning at your required beginning date, that's whenever you had to start those RMDs if you had an employer plan with dollars in it.
• 17:57
  Now, here in 2024, the Secure Act 2.0 is changing that to where any dollars that are in a Roth four zero one ks, that does not have to be distributed as an RMD, only the traditional four zero one ks's are going to have to be distributed through RMDs. And this basically just aligns this with the IRA side. So if you have tax deferred dollars, that's what the RMDs are going to apply to regardless of it's in an IRA or a four zero one ks. If you have Roth dollars that can stay in there throughout your life, no RMDs required. So now there's really just no difference between a Roth IRA and a Roth four zero one k from an RMD standpoint.
• 18:29
  And finally, this one maybe doesn't apply as much to you as someone who's closer to retirement. But if you've got kids or grandkids or someone who does have student loans, this one can be maybe a helpful tip for them. So here's the new provision. Employers in 2024 have the option to add a new provision to their plan documents that state if an employee is making student loan payments, we can also match those payments to help them pay those loans off sooner. So what this is, is kind of in lieu of actually making a contribution to the employer retirement plan.
• 19:01
  So think of it this way, if someone is paying off student loans, instead of making contributions to their four zero one ks plan to get a match that they otherwise would be missing out on, they can then take that amount of money they were saving or contributing to the plan, and they can start paying those student loan payments off. And if their employer has adopted this new provision, the employer will use the matching contributions to help pay off those student loans as opposed to the person missing out on the matches. It So kind of incentivizes those who are working and trying to decide between, hey, should I pay off my student loans or should I get, you know, the 3% or 5%, whatever the dollar amount is to get to the match. They don't have to make that decision maybe as difficult as anymore because their employer might also be matching their payments up to that dollar amount on their behalf to their student loan. So kind of a cool provision.
• 19:49
  So maybe that doesn't apply to you, maybe it might apply to someone you know, or a family member that does have student loans, tell them to ask their employer, hey, have we adopted this for 2024? And if so, I need to know what I can do to make this change on my elective deferrals so that we can pay off these student loans that I've got. So just something to think about if you know someone with student loans, just wanted to kind of throw that at you, even though it might not apply to you directly. So, like I said, this is a lot of kind of in the weeds numbers. So with that, I understand it's probably hard to understand or digest all of this via audio or just in podcast format.
• 20:23
  That's why I want to give you that cheat sheet. So be sure to email me asking for that and I'll happily send it over. With that, I think this is pretty much all I had to say today. So hopefully it's helpful for you as you start planning for 2024. And I really appreciate you being here with me throughout this journey here in 2023.
• 20:41
  I'm excited about all the things that come here next year and just being able to add more value, provide you with helpful information around retirement planning and help you ultimately retire successfully. So remember, if you're enjoying the podcast, leave a review. Don't forget to email me. And, with that, I hope you have a great week and a happy new year, and we will talk to you next time in 2024. Hey, it's Jacob again, and I wanted to extend a quick offer to you.
• 21:06
  If you have a question and you would like to have it answered here on the show, please email me at jacob@retirementanswers.net. And I'd love to answer that question for you right here on the show. Also, I wanted to remind you that nothing discussed in today's episode is meant to be financial, legal, or tax advice. Retirement Answers is for educational purposes only. Thanks for tuning into this week's episode.
• 21:27
  I look forward to talking with you again next week.