New Tax and Retirement Numbers to Know for 2024

by | Jan 31, 2024 | Financial Planning, In The News, Retirement, Tax

INFLATION LEADS TO CHANGES

Annually the IRS adjusts key numbers, to keep in line with inflation.  Due to the soaring inflation we experienced in 2022, many adjustments for 2023 were higher than usual.  The adjustments for 2024 now build on those increases.

Here is what you need to know:

Contribution Limits:

  • 401(k), 403(b), and 457 plans increased the maximum contribution amount from $22,500 in 2023 to $23,000 in 2024.
  • IRA contribution limit increased from $6,500 to $7,000.
  • SIMPLE IRA plans increased the maximum contribution amount from $15,500 to $16,000.
  • Catch-up Contributions for those age 50 and over:
    • 401(k), 403(b), and 457 plans: the additional catch-up amount remains $7,500.
    • IRAs: the additional catch-up amount remains the same at $1,000.
    • SIMPLE IRAs: the additional catch-up amount remains $3,500.

Action Item: If you are working, consider increasing your contributions to reach the maximum contribution amounts.  Once you attain age 50, make sure you are also making your catch-up contributions, if possible.  Reminder that starting in 2025, higher catch-up contributions will be allowed for plan participants aged 60-63.

Federal Gift and Estate Tax Increases:

  • Gift tax exclusion increases from $17,000 in 2023 to $18,000 in 2024.
  • Federal estate tax exclusion increases from $12.92 million in 2023 to $13.61 million in 2024. (According to the 2017 Tax Cuts and Jobs Act, this amount is set to decrease by half beginning January 2026.)

Income Taxes:

  • The marginal rates of the income tax brackets – 10%, 12%, 22%, 24%, 32%, 35% and 37% remain unchanged from 2023.
  • The standard deduction for married couples filing jointly increased $1,500 to $29,200 in 2024.
  • HSAs (Health Savings Accounts)
    • Family coverage contribution limit of $7,750 in 2023 is now $8,300 in 2024.
    • Self-only coverage increased from $3,850 in 2023 to $4,150 in 2024.

Social Security Amounts:

  • The maximum amount of earnings subject to the Social Security tax increased from $160,200 in 2023 to $168,600 in 2024. (NOTE: This cap does not apply for the Medicare tax as all earnings are subject to the Medicare tax)
  • The maximum Social Security benefit at Social Security Normal Retirement Age is $3,822/month in 2024. This is an increase of $195/mo. from 2023.
  • The Cost-of-Living Adjustment (COLA) was 3.2% in 2024. This was significantly less than the 8.7% increase in 2023.

If you have any questions regarding how these adjustments may affect you, please contact us.