Tax season is here, and with it come some important changes that could impact your retirement savings, required distributions, and tax strategies. Whether you’re contributing to an IRA, planning for retirement, or looking to optimize your investments, it’s important to stay ahead of the latest updates. Even more importantly, 2025 could bring some major tax shifts, making 2024 a critical year for planning.
You Can Save More in Your Retirement Accounts
Good news! The IRS has increased IRA contribution limits to $7,000 (or $8,000 if you’re 50+). If you’re saving in a Roth IRA, be aware that the income eligibility phase-out starts at $146,000 for single filers, cutting off completely at $161,000. This means higher earners may need to look into backdoor Roth IRA strategies or Roth conversions to keep growing their tax-free savings.
Secure 2.0 Act: What’s Changing?
If you’re close to retirement, the Required Minimum Distribution (RMD) age has now been pushed to 73, meaning you can let your money grow tax-deferred for longer. Another big change is coming in 2025: Workers aged 60-63 can make higher catch-up contributions, but if you earn over $145,000, those catch-up contributions must go into a Roth account (after-tax money). Translation? More taxes now, but tax-free withdrawals later.
Inherited IRAs: The 10-Year Withdrawal Rule is Here to Stay
If you inherited an IRA, be careful: the IRS requires most non-spouse beneficiaries to empty the account within 10 years. Depending on your situation, you may also have to take annual required distributions within that period, rather than waiting until the last year. Skipping this could mean unexpected tax penalties!
Tax-Loss Harvesting & Market Volatility
Even in a strong market, there are opportunities to offset gains with tax-loss harvesting. If you have losing investments, selling them strategically can help lower your tax bill while reinvesting in stronger positions.
Should You Consider a Roth Conversion?
We’re still in a period of historically low tax rates thanks to the 2017 tax cuts, but those expire in 2026. That means 2024 and 2025 might be the last great years for Roth conversions at lower tax rates before we see potential tax hikes. If you expect to be in a higher bracket later, now might be the time to act.
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Disclaimer: This blog is for informational purposes only and is not intended as investment advice or a recommendation to buy or sell any security. Views expressed are current as of the publication date and may change. Consult a qualified financial advisor to assess your investment objectives and risks before making any decisions. All investments carry risk, including loss of principal.
