Let’s explore the new 401K rules and benefits in 2024 and how they can boost your retirement benefits.
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⏰ Table of Contents ⏰
0:00 New 401K Rules in 2024
0:26 “Roth” Employer Match
1:26 401K Emergency Savings
4:19 401K Emergency Withdrawals
5:04 401K Catch-Up Contributions
7:31 529 to Roth IRA Rollover
8:46 401K Student Loan Matching
9:48 Age 60 to 63
10:33 Automatic 401K Enrollment
11:06 RMD (Required Minimum Distributions)
#FIREPsyChat #FinancialIndependence #401K
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New 401K Rules You Need to Know Starting in 2024
Planning for retirement has never been more crucial, especially with the new 401K rules set to take effect in 2024. These new regulations will have a significant impact on how individuals prepare for their golden years. Understanding the changes and adapting your retirement savings strategy accordingly is essential to secure a financially stable future. Here are the key changes that you need to know starting in 2024.
1. Higher Contribution Limits
One of the most significant changes to the 401K rules is an increase in contribution limits. Starting in 2024, the maximum annual contribution limit will be raised from $19,500 to $20,500. This means if you are under 50 years old, you can contribute an additional $1,000 to your retirement savings. For those aged 50 or older, the catch-up contribution limit will also see an increase from $6,500 to $7,000. These higher limits provide an opportunity to maximize your retirement savings potential.
2. Automatic Enrollment
To encourage more people to save for retirement, the new rules will also introduce automatic enrollment in 401K plans. Employers will be mandated to enroll new employees automatically. However, individuals will have the option to opt-out if they wish. Automatic enrollment is expected to improve retirement savings participation, particularly among younger workers who may not consider saving for retirement a priority.
3. Roth 401K Conversion Option
Another significant change is the introduction of the Roth 401K conversion option. Currently, any contributions made to a 401k plan are on a pre-tax basis. However, starting in 2024, participants will have the option to convert their pre-tax contributions to Roth contributions within their plan. This change will allow individuals to pay taxes upfront but enjoy tax-free withdrawals during retirement. This option provides increased flexibility for retirement income planning.
4. Required Minimum Distributions (RMDs) Delayed
Previously, individuals were required to start taking distributions from their retirement accounts, such as 401Ks, at age 72. However, the new rules will increase the age for required minimum distributions (RMDs) to 75. This delay gives individuals more time to grow their retirement savings before they are required to start withdrawing funds, allowing for potential tax advantages.
5. Lifetime Income Disclosure
In an effort to enhance transparency about retirement savings, the new regulations also mandate the inclusion of a lifetime income disclosure in 401k account statements. This disclosure will provide an estimate of the monthly income an individual could potentially receive based on their current savings balance. This information aims to help employees better understand how their retirement savings translate into a lifelong income stream.
It is crucial to stay informed about these upcoming changes to the 401K rules to make strategic decisions regarding your retirement savings. Consider consulting with a financial advisor who can help you navigate through these changes and tailor a retirement plan that fits your individual needs. With careful consideration and proactive financial planning, you can ensure a more secure and comfortable retirement.
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Do these apply to 403b plans as well or just 401ks?
Are there any similar emergency savings provisions for 401a or 403b accounts?
2500 emergency savings lol. Good luck if you get in a real emergency and that’s all you’ve got.
Irs can kick a rock if I do a Roth it’s already taxed I don’t need those corrupt clowns to tell me what or when I can pull my already TAXED money. I encourage everyone if u in retirement age get payed. Waiting to get more don’t make sense N tomorrow isn’t promised or the money
I have a relative that is 63 this year (2023). In 2033 she will be 73. Does that mean her new RMD will now be at age 75?
Probably the best YouTube video I've seen all year. Great content great explanations!
Congress could complicate a ham sandwich. Lawyers….
I earn less than $145,000, and I’m putting my catch up contribution in a Roth 401k. When I get my annual salary increase next year I’m going to increase how much I put in my Roth 401k by 2%. By the time I retire my entire 401k contribution will be in a Roth so I won’t be taxed when I eventually withdraw it.
One correction: TSP still doesn’t allow “Roth” employer contributions as of 2023. Your employer match will only go into the traditional bucket of your TSP
Ug you lost me at John Hope Bryan, he’s a master manipulator at best
If a max funded 529 beneficiary rolled over $35k at 18 & just left it there until traditional retirement age invested in a Vanguard S&P 500 index fund for 49 years with withdrawals begining at 67 & they never put another penny into the Roth there would based on average returns to the S&P 500 be just over $7.25 million in their Roth account as an entirely tax free gift from whichever relative funded their college education. I mean free college and not needing to save for retirement sounds like a pretty good head start in life.
I mean if you also started contributing the max contribution to that Roth at 18, by age 40 you should probably be able to retire on the Roth alone.
Directly from the TSP Website:
The TSP will allow you to change the tax status of your contributions from Traditional to ROTH which will affect contributions moving forward. However, the TSP does not allow for retroactive changes; you cannot change the monies you already allocated into the traditional tax status (tax-deferred) to the ROTH status (tax-free).
The TSP does not allow for ROTH conversions.
The ONLY way to convert TSP pre-tax dollars to Roth is by transferring your traditional TSP out of the TSP into a traditional IRA then then taking those funds and converting them into a ROTH IRA.
I have to assume that you are not currently enrolled in the TSP.
So question, the $145k income limit for pretax catch-up provision
What if the person files married-jointly? I cannot find that via google
One of my parents is just over that $145k but the other is very much below that
That change to catchup contributions for high income earners is horrible. If you were behind on saving for retirement you'll now be even further behind because they made it more difficult to catchup.
Let's not forget that the TCJA will also end in 2026, so those same people will also be paying even more in taxes.
With enough time there won't be a middle class. You'll either be wealthy or poor. If anything, this just tell you that the best path forward is to focus on investments.
I work for kellogg do kellogg have the emergency saving plan ?
@FIREPsyChat can you dig a bit more into the Traditional TSP –> ROTH TSP conversion strategy?
From the TSP website, I can't find any information or option to do this.
It would be great if I could have my Employer Match be in ROTH so I have 100% contributions to ROTH given my low 12% marginal tax rate.
Thanks!
I had a slight bit of confusion at 6:12. It is my understanding that if a person makes less than $145k, catch-up contributions don't apply because under that income limit they can contribute to 401k the full $22,500 , and do it to either traditional or roth.
Great video. To clarify. All unused money in my child’s 529 can be rolled over to their Roth account with cap of $35,000 assuming they start working after college and begin earning.
for 529 u didnt mention that the rollover counts towards roth ira contribution limit for the year and that u still need to have earned income to rollover.