Who Is Ready For 2024?
My friends, it’s that time of year again. Fall is in the air, daylight savings has ended, and the folks at the IRS have reviewed inflation numbers and have re-set the annual limits for various account types. Let’s take a closer look at what’s on tap for next year.
For clients who are still saving money towards retirement, 2024 will allow for additional tax-deferred and tax-free savings. As financial planners, we’re happy to see these numbers increase! This said, many clients will need to communicate with their HR offices to make changes to their paycheck withholding.
TSP, 401(k), 403(b), and 457 plans have new contribution limits of $23,000. For those age 50 and over, the catch-up provision will remain at $7,500, meaning a total of $30,500 can be contributed.
Roth and Traditional IRAs are getting another bump this year. The maximum contribution is now $7,000. For those age 50 and over, the catch-up provision is still in place and remains unchanged at $1,000, meaning a total of $8,000 can be contributed.
As always, there are some income rules when making contributions to both IRAs and Roth IRAs. If you would like to contribute to an IRA or Roth IRA in addition to your workplace plan, please talk with us to make sure you’re eligible.
For SIMPLE IRAs, the contribution limit is now $16,000. For those age 50 and over, the catch up provision is still in place and is now $3,500, meaning a total of $19,500 can be contributed.
Those using a SEP IRA have a limit of the lesser of 25% of compensation, or $69,000.
Lastly, for those who are self-employed and using individual 401(k) plans, the maximum defined contribution limit has increased to $69,000. For those age 50 and over, the catch-up provision is still in place and is now $7,500, meaning a total of $76,500 can be contributed.
In non-retirement news, many clients are looking to gift periodically to family members or friends. In 2024, the gift exclusion amount increases to $18,000.
For those who have high deductible health plans, and are eligible to contribute to HSAs, we’re excited to share that the self-only contribution limit will be increased to $4,150, and the family contribution limit will increase to $8,300. For those age 50 and over, an additional $1,000 can be contributed.
Flexible spending accounts will also see an increase in 2023. The Health FSA limit is now $3,200. The Dependent Care FSA maximum is still not eligible for inflation adjustment and will remain at $2,500 for married filing separately, and $5,000 for singles and married filing jointly.
Pre-tax commuter and parking contribution limits are increasing to $315 for the year.
A new benefit born out of the CARES Act in 2020 is the ability for employers to contribute to employee student loan repayment. If the benefit is less than $5,250 a year, the repayment is excludible from employee wages. Benefits over this amount are included in wages and are taxable to the employee. Most employers do not currently offer this benefit, but the companies that do have started to increase substantially over the past few years.
Also, thanks to Secure Act 2.0, which passed in December 2022, there is a new provision available in 2024: employers can count student loan repayments towards 401k matching benefits. This has the potential to be very helpful, especially for more recent graduates and for lower income employees. This said, as with any new provision, there are logistics to work out before there is widespread adoption among employers and plan providers. For now, it’s worth an ask to your HR department to see if this provision is available for your company’s retirement plan and if it is, what you need to do to participate.
If you have any questions about this information, or wonder whether it can or does apply to you and your situation, please give us a call. We would be happy to discuss your specific circumstances.