ST. CROIX INSIGHTS

Mid-Year Check: Retirement Moves to Implement in 2024

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Retirement Plan Beneficiaries

As we reach the midpoint of the year, it’s important to review the strategies you’ve been implementing under the SECURE 2.0 Act. This law, enacted in late 2022, introduced several significant provisions, some of which came into effect in 2023. For instance, the age threshold for required minimum distributions (RMDs) increased from 72 to 73. Many changes became relevant this year, with more provisions activating in 2025 and beyond.

SECURE 2.0 Act: 7 Retirement Strategies and Tips

Here are seven strategies to consider for the rest of the year. You’ll want to check if your employer has added these new provisions to their retirement plans.

  1. Evaluate Emergency Withdrawals: If you’ve needed to make early withdrawals from tax-favored retirement accounts like 401(k)s before age 59½, remember that SECURE 2.0 introduced a new exception for “unforeseeable or immediate financial needs.” You can take one distribution of up to $1,000 annually without the usual 10% penalty.

    Tip: Consider whether you might need to use this option before year-end. If so, remember you can re-contribute the distribution within three years.

  2. Utilize “Rainy Day” Accounts: If your employer offers emergency savings accounts (ESAs) funded by Roth 401(k) contributions, ensure you’re taking advantage of this opportunity for tax-free emergency funds.

    Tip: Contributions are capped at $2,500 (subject to inflation indexing). Review your contributions to maximize your benefits.

  3. Postpone Roth 401(k) Payouts: Starting this year, Roth 401(k)s no longer require annual RMDs, allowing for continued tax-advantaged growth. Ensure you’re not making unnecessary withdrawals.

    Tip: Review your distribution plans to benefit from this new rule.

  4. Maximize IRA Contributions: For those aged 50 or older, the additional $1,000 catch-up contribution to IRAs is now indexed for inflation starting in 2024. This year, it remains $1,000. Tip: If you haven’t already, make sure to max out your contributions, including the catch-up amount.

    Alert: The IRS has delayed the requirement for high earners to make 401(k) catch-up contributions to a Roth 401(k) until January 1, 2026. If you’ve been planning around this change, you now have additional time to adjust. Take this mid-year opportunity to review these strategies and make any necessary adjustments. Ensuring you’re aligned with SECURE 2.0 provisions can help optimize your financial planning for the remainder of the year and beyond.

  5. Optimize Student Loan Repayments: If you’re repaying student loans, check if your employer matches 401(k) contributions with qualified student loan payments (QSLPs). This can help reduce your debt while building retirement savings.

    Tip: Ensure you’re meeting the requirements to receive these matching contributions.

  6. Plan for 529 Rollovers to Roth: If you have a 529 plan, unused funds can now be rolled over into a Roth IRA after 15 years, subject to annual contribution limits and a lifetime cap of $35,000.

    Tip: Review your 529 plan and consider if this rollover might benefit you in the future.

  7. Review Early Withdrawal Exceptions: The SECURE 2.0 Act adds new exceptions to the 10% penalty for early withdrawals. Starting in 2024, victims of domestic abuse can withdraw up to $10,000 or 50% of their account balance penalty-free.

    Tip: If this applies to you or someone you know, plan accordingly to take advantage of this provision.

As the year progresses, it’s crucial to reassess your retirement strategies in light of the SECURE 2.0 changes. These new provisions offer various opportunities to optimize your retirement savings, manage emergencies, and take advantage of new benefits.

Navigating these complexities can be challenging. As a financial advisor, I can provide personalized guidance to help you:

  • Understand and implement the new withdrawal exceptions and savings opportunities.
  • Maximize your contributions to IRAs and Roth 401(k)s.
  • Plan effectively for student loan repayments and 529 rollovers.
  • Adjust your financial plans in response to the postponed Roth 401(k) rule.

Contact me for a review of your current strategies to ensure you’re making the most of these new provisions and staying on track with your financial goals for 2024 and beyond.

 

As we reach the midpoint of the year, it’s important to review the strategies you’ve been implementing under the SECURE 2.0 Act. This law, enacted in late 2022, introduced several significant provisions, some of which came into effect in 2023. For instance, the age threshold for required minimum distributions (RMDs) increased from 72 to 73. Many changes became relevant this year, with more provisions activating in 2025 and beyond.

SECURE 2.0 Act: 7 Retirement Strategies and Tips

Here are seven strategies to consider for the rest of the year. You’ll want to check if your employer has added these new provisions to their retirement plans.

  1. Evaluate Emergency Withdrawals: If you’ve needed to make early withdrawals from tax-favored retirement accounts like 401(k)s before age 59½, remember that SECURE 2.0 introduced a new exception for “unforeseeable or immediate financial needs.” You can take one distribution of up to $1,000 annually without the usual 10% penalty.

    Tip: Consider whether you might need to use this option before year-end. If so, remember you can re-contribute the distribution within three years.

  2. Utilize “Rainy Day” Accounts: If your employer offers emergency savings accounts (ESAs) funded by Roth 401(k) contributions, ensure you’re taking advantage of this opportunity for tax-free emergency funds.

    Tip: Contributions are capped at $2,500 (subject to inflation indexing). Review your contributions to maximize your benefits.

  3. Postpone Roth 401(k) Payouts: Starting this year, Roth 401(k)s no longer require annual RMDs, allowing for continued tax-advantaged growth. Ensure you’re not making unnecessary withdrawals.

    Tip: Review your distribution plans to benefit from this new rule.

  4. Maximize IRA Contributions: For those aged 50 or older, the additional $1,000 catch-up contribution to IRAs is now indexed for inflation starting in 2024. This year, it remains $1,000. Tip: If you haven’t already, make sure to max out your contributions, including the catch-up amount.

    Alert: The IRS has delayed the requirement for high earners to make 401(k) catch-up contributions to a Roth 401(k) until January 1, 2026. If you’ve been planning around this change, you now have additional time to adjust. Take this mid-year opportunity to review these strategies and make any necessary adjustments. Ensuring you’re aligned with SECURE 2.0 provisions can help optimize your financial planning for the remainder of the year and beyond.

  5. Optimize Student Loan Repayments: If you’re repaying student loans, check if your employer matches 401(k) contributions with qualified student loan payments (QSLPs). This can help reduce your debt while building retirement savings.

    Tip: Ensure you’re meeting the requirements to receive these matching contributions.

  6. Plan for 529 Rollovers to Roth: If you have a 529 plan, unused funds can now be rolled over into a Roth IRA after 15 years, subject to annual contribution limits and a lifetime cap of $35,000.

    Tip: Review your 529 plan and consider if this rollover might benefit you in the future.

  7. Review Early Withdrawal Exceptions: The SECURE 2.0 Act adds new exceptions to the 10% penalty for early withdrawals. Starting in 2024, victims of domestic abuse can withdraw up to $10,000 or 50% of their account balance penalty-free.

    Tip: If this applies to you or someone you know, plan accordingly to take advantage of this provision.

As the year progresses, it’s crucial to reassess your retirement strategies in light of the SECURE 2.0 changes. These new provisions offer various opportunities to optimize your retirement savings, manage emergencies, and take advantage of new benefits.

Navigating these complexities can be challenging. As a financial advisor, I can provide personalized guidance to help you:

  • Understand and implement the new withdrawal exceptions and savings opportunities.
  • Maximize your contributions to IRAs and Roth 401(k)s.
  • Plan effectively for student loan repayments and 529 rollovers.
  • Adjust your financial plans in response to the postponed Roth 401(k) rule.

Contact me for a review of your current strategies to ensure you’re making the most of these new provisions and staying on track with your financial goals for 2024 and beyond.