People planning to retire have many concerns. These include Social Security payment expectations, health costs, and many other circumstances related to wealth and money.
And it's important to understand the changes in retirement savings policies implemented by the federal government. Some of them involve 401(k)s and individual retirement accounts (IRAs).
In the current calendar year, there are a few things you should know about some changes starting in 2023.
The Internal Revenue Service (IRS) explained in a statement some highlights facing Americans.
First, people who contribute to their 401(k) plans have a new limit. In 2023, the limit was set at $22,500. Now, that has increased to $23,000.
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The IRA contribution limit has also increased, from $6,500 in 2023 to $7,000 in 2024.
But there is an important note for people aged 50 and over.
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Americans 50 and Older Should Know These Facts
There is a 401(k) catch-up contribution policy for people age 50 and older who are moving to get their finances in order.
The federal government limit for people in this age range remains $7,500 in 2024.
And taxpayers who deduct contributions from their IRAs should consider a few conditions.
The IRS statement explains this element of the policy as follows:
If during the year the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a workplace retirement plan, the deduction phaseouts do not apply.)
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So how are Roth IRAs affected by the change?
The income phase-out range for taxpayers with IRA contributions has also been increased. In 2023, it was $146,000. This year, it is $161,000 for single people and heads of household.
Married couples filing jointly see an increase in the elimination range between $230,000 and $240,000, which represents an increase of between $218,000 and $228,000.
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You must also consider the saver's credit. This is often called the Retirement Savings Contributions Credit.
For low- and moderate-income workers, the limit is set at $76,500 for married couples filing jointly, which is an increase from 2023, when it was $73,000.
That policy is $57,375 for heads of household. Previously, it was $54,750.
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