Making the Most of Your 2024 Retirement Contributions
As we navigate through 2024, it’s crucial to understand the various retirement contribution opportunities available, especially for those over 50. Strategic planning allows you to maximize your retirement savings while taking advantage of valuable tax benefits. Here’s your comprehensive guide to important deadlines and smart moves to make before year-end.
Traditional and Roth IRA Deadlines
The good news is you have until Tax Day (April 15, 2025) to make IRA contributions for the 2024 tax year. However, waiting until the last minute isn’t always the wisest strategy. Here’s what you need to know:
- Maximum contribution for 2024: $7,000
- Catch-up contribution for age 50+: Additional $1,000
- Total maximum if you’re over 50: $8,000
Pro Tip: Consider making your contributions early in the year rather than waiting until Tax Day 2025. This gives your money more time to benefit from potential market growth and compound returns.
401(k) and Workplace Plans: Act Before December 31
Unlike IRAs, employer-sponsored retirement plans operate strictly on a calendar-year basis. Your deadline for 2024 contributions is December 31, 2024. Here are the key numbers:
- Base contribution limit: $23,000
- Catch-up contribution for age 50+: $7,500
- Total maximum if you’re over 50: $30,500
Strategic Move: If you still need to maximize your 401(k), calculate how many pay periods remain in 2024 and adjust your contribution percentage accordingly. Remember, employer matching is essentially free money – don’t leave it on the table!
Tax-Smart Strategies for Year-End
Year-End Retirement Planning
1. Roth Conversion Considerations
If you’re considering converting traditional IRA funds to a Roth IRA, consider doing so before year-end. This can be particularly advantageous if:
- You’ve had a lower income year
- You anticipate being in a higher tax bracket in retirement
- You want to reduce future Required Minimum Distributions (RMDs)
2. Required Minimum Distributions
If you’re 73 or older, remember that your RMD must be taken by December 31, 2024. Missing this deadline results in a steep 25% penalty on the amount not withdrawn.
3. Qualified Charitable Distributions (QCDs)
For those 70½ or older, you can make QCDs directly from your IRA to qualified charities up to $105,000. This counts toward your RMD without increasing your adjusted gross income.
Smart Moves to Make Now
- Review Your Current Contributions
- Check your year-to-date contributions
- Calculate how much more you can contribute
- Adjust payroll deductions if needed
- Coordinate with Your Spouse
- Ensure both partners maximize catch-up contributions
- Consider spousal IRA contributions if one partner has limited income
- Consider Tax Diversification
- Balance between pre-tax and Roth contributions
- Evaluate whether a Roth conversion makes sense this year
- Maximize HSA Contributions
If you have a Health Savings Account, don’t forget about these valuable triple-tax-advantaged contributions:- Individual coverage: $4,150
- Family coverage: $8,300
- Age 55+ catch-up: Additional $1,000
Remember, these contribution limits and deadlines are opportunities, not obligations. Make decisions based on your financial situation, retirement goals, and current tax position. Consider consulting with a financial advisor or tax professional to create a strategy that best suits your needs.
The key is to act thoughtfully but promptly. Whether you’re maxing out catch-up contributions or making strategic Roth conversions, having a plan well before year-end will help ensure you make the most of these opportunities while avoiding last-minute rushes and potential mistakes.
Your retirement security is worth the effort of careful planning. Take time now to review your options and make adjustments that will benefit your financial future.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.