Every so often the federal government approves changes to the contribution limits for tax-advantaged retirement plans.
Staying up to date on these changes is important so you know how they may impact you and your future.
Matt Meese, a part of the Wealth Management Team at Mountain America Credit Union, joined us with the contribution changes that went into effect in 2024,
The annual contribution limit for 401(k), 403(b) and most 457 plans, as well as the government's Thrift Savings Plan, increased by $500, from $22,500 to $23,000. Those ages 50 and older can save an additional $7,500 per year in catch-up contributions.
The annual contribution limit for a traditional IRA also increased by $500, from $6,500 to $7,000. The catch-up contribution for those ages 50 and older is an additional $1,000.
The income ranges to determine eligibility for deductible contributions to a Roth IRA increased, with the amount depending on your tax-filing status.
For people using a Health Savings Account as an additional retirement savings vehicle, the annual contribution maximum increased to $4,150 for individual coverage and $8,300 for families. Those ages 55 and older can bank another $1,000 on top of these limits.
Meese explained that there were also changes to withdrawal limits and the associated penalties.
New rules allow withdrawals from a traditional IRA up to $1,000 for personal or family emergency expenses without paying the 10 percentearly withdrawal penalty.
You can also avoid the early withdrawal penalty for unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income. The amount of the withdrawal is limited to the cost of the incurred expense.
Other qualified expenses for a penalty-free early withdrawal are higher education expenses, home purchases (up to a $10,000 maximum lifetime benefit) and certain expenses for military reservists called to active duty.
Keep in mind that you will still have to pay income tax on the funds you withdraw from your traditional IRA.
Required minimum distributions from tax-advantaged retirement plans now begin at age 73 instead of age 72. Delaying your distributions could affect your tax situation, so be sure to check with a qualified tax advisor or wealth advisor before deciding when to begin withdrawing from a tax-advantaged retirement plan.
To better understand how these changes may affect your retirement planning, contact Mountain America Investment Services to speak with a licensed wealth advisor at macu.com/invest.
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