Dozens of changes are on the cards between now and the end of 2027. Here are five key changes taking effect in 2024 and what they will mean for you.
Many early-career workers face a dilemma when it comes to achieving their financial goals: pay off student debt or invest for retirement?
Starting next year, you might be able to do both at the same time. Secure 2.0 allows companies to “match” employees’ student loan payments with contributions to their work retirement accounts.
The law allows employers to include emergency savings accounts as part of workplace plans, such as 401(k)s. Employees would make Roth (after-tax) contributions to these accounts – called Retirement-Linked Emergency Savings Accounts, or PLESAs – up to a maximum balance of $2,500.
So-called 529 accounts are a way to invest money in a child’s future education. You may be able to deduct contributions to these funds from your income tax, and you won’t owe tax on withdrawals as long as the money goes toward qualified education expenses.
Starting in 2024, money in a 529 account that isn’t used can be rolled over tax-free into a Roth IRA. The 529 must have been open for at least 15 years and lifetime refinances are up to $35,000.
Current rules allow retirement savers to withdraw money from their 401(k)s and traditional individual retirement accounts before retirement to meet an “immediate and significant” financial need. Withdrawal may be subject to income tax, and individuals under age 59½ generally owe a 10% tax penalty.
Starting in 2024, you will be able to withdraw $1,000 per year to cover your personal and family emergency expenses without having to pay the 10% penalty. All you need to do is certify yourself that you need money in an emergency.
Victims of domestic violence under age 59½ can withdraw up to $10,000 from IRAs and 401(k)s without paying the penalty.
The Roth version of a 401(k) is subject to similar tax rules as a Roth IRA. You contribute money you’ve already paid taxes on, and in exchange for forgoing an upfront tax benefit, your money grows in your account tax-free. Provided you’re 59½ and have held the account for at least five years, you won’t owe a cent in taxes when you withdraw the funds in retirement.
Until recently, there was one major difference: You had to start taking distributions from your Roth 401(k) the year you turned 73 (or 70½ if you reached that age before January 2020) or you were at risk. to an IRS penalty.
Secure 2.0 eliminates this problem starting in 2024, aligning the rules around Roth 401(k)s with those for Roth IRAs.
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