The 5 Most Important Changes to Your Retirement in Congress’s New ‘Secure 2.0’ Bills (2024)

FAQs

The 5 Most Important Changes to Your Retirement in Congress’s New ‘Secure 2.0’ Bills? ›

SECURE 2.0 is increasing the maximum amount you can make in catch-up contributions each year, based on the type of retirement account you have. If you have an IRA and are older than 50, you can contribute a total of $8,000 in 2024 (including a $1,000 catch-up contribution). This is an increase of $500 compared to 2023.

SECURE 2.0 is increasing the maximum amount you can make in catch-up contributions each year, based on the type of retirement account you have. If you have an IRA and are older than 50, you can contribute a total of $8,000 in 2024 (including a $1,000 catch-up contribution). This is an increase of $500 compared to 2023.

IRA and 401k contribution limits increase

The limit on annual contributions to an IRA rises to $7,000, which is up from $6,500. Catch-up contributions for taxpayers aged 50 and older are subject to cost-of-living adjustments, but these limits remain unchanged for 2024 at $1,000, or $8,000 in total contributions.

The SECURE 2.0 Act made changes designed to encourage employees to contribute to their employers' 401(k) or 403(b) plans. These changes allow employers to offer small financial incentives to employees who choose to participate in these retirement savings arrangements.

Expanding Automatic Enrollment in Retirement Plans. SECURE 2.0 requires that employers with 401(k) and 403(b) plans established after December 29, 2022, automatically enroll participants in such plans, effective for plan years beginning after December 31, 2024.

Salary reduction contributions

The amount an employee contributes from their salary to a SIMPLE IRA cannot exceed $16,000 in 2024 ($15,500 in 2023; $14,000 in 2022; $13,500 in 2020 and 2021; $13,000 in 2019 and $12,500 in 2015 – 2018).

The beginning age for RMDs is 75 for those who turn 74 after December 31, 2032. Another way to look at it is the beginning age for RMDs is 73 for those born from 1951 through 1959 and is 75 for those born in 1960 or later.

The 5-year rule regarding Roth IRAs requires a waiting period before you can withdraw earnings or convert funds without a penalty. To withdraw earnings from a Roth IRA without owing taxes or penalties, you must have held the account for at least five tax years.

The withdrawal may be subject to income tax, and those under age 59½ typically owe a 10% tax penalty. Starting in 2024, you can make one withdrawal of $1,000 per year to cover personal and family emergency expenses without owing the 10% penalty. You only need to self-certify that you need the money for an emergency.

Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking RMDs to age 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024.

What are the new 401k rules for 2024? ›

Highlights of changes for 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan is increased to $23,000, up from $22,500. The limit on annual contributions to an IRA increased to $7,000, up from $6,500.

An individual may take an emergency expense withdrawal from their retirement account in an amount that is the lesser of (i) $1,000, or (ii) the excess of the individual's vested account balance in the Plan over $1,000.

But there are SECURE Act 2.0 changes in 2024 that will expand what the IRS accepts as penalty-free withdrawals. Emergency expenses. The IRS could allow a withdrawal of up to $1,000 to be exempt from the 10% tax penalty if it's for an unexpected and immediate financial need.

Long-term part-time employees receive expanded eligibility

Prior to the SECURE Act 2.0, employees who worked between 500 and 999 hours for three consecutive years were required to be allowed to participate in their company's retirement plan. The SECURE Act 2.0 reduces the time period to two years, effective in 2025.

SECURE 2.0 increases the maximum pension benefit that may be distributed without the participant's or beneficiary's consent from $5,000 to $7,000, starting with distributions made after December 31, 2023. This change is permissive, not mandatory.

For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year. Heads of households, or unmarried taxpayers who have dependents and pay for more the half of the expenses of a household, can take a standard deduction of $21,900 in 2024, an increase of $1,100 from 2023.

Solo 401(k) contribution limits for 2024

In 2024, aggregate contributions can reach up to $69,000 if you are under 50 and $76,500 if you are 50 or older. While those are the absolute maximums that can be contributed to a solo 401(k), the amount you can contribute may be different.