Important Retirement Updates & Changes for 2024 - Cravitz Financial & Insurance Solutions

Important Retirement Updates & Changes for 2024

It’s not always easy to keep up with rule changes and updates when they happen each year, but we like to stay on top of anything that might impact your retirement planning.

In today’s episode, we will bring you up to date on what’s new for 2024.

From tax brackets to Social Security to 529 plans, we’ll cover some key planning items that everyone will want to know about.

This year probably won’t bring any major changes that will dramatically change your planning strategies, but there could be some things might call for adjustments over the course of the year.

Whether you act on anything we discuss today, you’ll want to consider the role these items could play as a part of your overall planning in 2024.

Here’s some of what we discuss in this episode:

  • You’ll get an increase to both your standard deduction on taxes and how much you can make in each tax bracket.
  • The Social Security Cost of Living Adjustment isn’t has high as it was a year ago but still a nice bump.
  • What you need to know about the increase in Medicare costs.
  • 529 plans can start rolling money into a Roth but there are some restrictions to be aware of.
  • There is a little more flexibility to withdrawing from 401k accounts early.
  • What you need to be aware of with Required Minimum Distributions in 2024.

Full Transcript:

Ben (00:01):

Happy New Year. Welcome into Candid Conversations. We've got a good show for you today as we're talking about some important rule updates and changes in regards to retirement that you will want to know about heading into 2024. We'll update you on things like tax brackets, Social Security, 529 plans, and 401(k) contributions, some important stuff. We'll dive into it coming up next.

Announcer (00:23):

When it comes to financial planning, you need to cut through the jargon so that you can understand how to achieve your own retirement success. This is Candid Conversations Retirement Talk with Ryan Cravitz of Cravitz Financial & Insurance Solutions.

Ben (00:37):

We're glad to have you on another episode of Candid Conversations Retirement Talk with Ryan Cravitz at Cravitz Financial in Orange, California. Ryan, happy New year to you. How are you?

Ryan (00:46):

I'm doing well. Happy 2024 to you, Ben.

Ben (00:50):

Yeah. Did you make it to midnight to celebrate the new year?

Ryan (00:54):

I don't even think I made it to midnight in New York this year. Come on now.

Ben (00:59):

I was going to say, you get to enjoy the benefits of watching the ball drop in Times Square at 9:00 PM

Ryan (01:05):

I didn't even make it to that. I think it was about 8:30. I made it till this year, but we had a full day on New Year's Eve and so I think by the time the evening came it was just kind of like, alright, let's just crash out here. My son had me playing all day. He's so into playing basketball now. It's crazy. We're just all over the place.

Ben (01:29):

I'm with you on that. We had a fairly busy New Year's Eve. We did one of the ball drops at a local kids museum earlier in the day, so they got to kind of experience that. But yeah, by the time 8:30, 9:00 o'clock rolled around, we're already running low on sleep anyway, I was like, I have no need to stay up late and try to see just for the new year. I'll catch up dates in the morning. We'll see it's 2024.

Ryan (01:50):

Absolutely. I'm right there with you, Ben.

Ben (01:52):

Well, I hope you all had a great new year, great holiday, and as we look ahead to 2024, I know there's a lot to dive into throughout the year, but we wanted to kind of start off the year with some important changes, maybe updates, nothing that's really huge and will dramatically change your retirement plan, but some things that you want to be aware of, maybe you'll need to make some adjustments over the course of the year if you haven't talked with a financial professional and want to do that. Of course Cravitz Financial can help you with any of your retirement planning needs. But today we've got a couple of different key categories we want to dive into, Ryan, but let's start off, I think with taxes and tax brackets because as we know, I know this year and over the coming couple of years we're going to see some changes in taxes, but it's always important as the year begins to kind of understand what those brackets might look like and how it might impact you, right?

Ryan (02:40):

Yeah, for sure. One of the big changes that we're seeing is because of inflation, which we've been experiencing now over the last couple of years. I mean we've always had inflation, but it's been low and it's been increasing for the last couple of years. So the impact that that has is on a lot of different things and one of them being the tax brackets here. And so one of the things that we're seeing positively is that the standard deduction, which most people take, especially in retirement, is increasing. So for single folks, it's going up by $750 and for married folks it's going up by $1,500. So that's definitely a nice increase. So for single people it'll be $14,600 and for married folks filing jointly, we're at $29,200, and if you're over 65, you get an additional amount even on top of that. So that's going to be a nice little extra bonus. All the tax brackets and such, as far as the tax rates, meaning like the 10%, 12%, 22% and so on, those are staying, but the actual numbers within the brackets are adjusting so you can make more money and still stay perhaps within the same tax bracket, which is definitely going to be a nice win.

Ben (04:04):

Alright, so a couple notes there for people that are paying attention to tax brackets. Again, work with the professional to understand if there's any changes or adjustments you can make over the course of the year to stay within a certain tax bracket. What about capital gains taxes?

Ryan (04:17):

Yeah, so the brackets here are increasing as well, and what's nice is that 0% tax bracket, for instance now in 2024, it's going up to $47,025. So what that means is that if you have long-term capital gains that don't exceed that limit, that potentially you may pay taxes at a 0% tax rate. Now this does factor in what your other income is, so you need to consider that as well, but nevertheless, in retirement, many retirees can position their income in such a way so that they could realize substantial amounts of capital gains and perhaps pay taxes at only a 0% rate. So it's a nice little addition. It's increased a little bit, so it's given a little bit more flexibility there to do some additional tax planning.

Ben (05:12):

That is nice. Anytime you can get out of taxes in some capacity, it's always a nice position to be in. Obviously not going to be for everyone, but there is that option there. And then the next, I guess, rate is for maybe a more larger percentage of the population.

Ryan (05:27):

And that 3.8% net investment income tax, that still applies, but it only applies above certain income thresholds, but it's still there. So no changes in that regard.

Ben (05:38):

Alright, sounds good. So taxes is a good thing to lead off with. Always important in regards to your financial planning and retirement planning. Anything you can do to save money over not only the course of the next year, but over the next dozen years or so as you get prepared for retirement, always can add up over the long term. Social Security, next up, Ryan, I know always some changes with the cost of living adjustment. I know a year ago we saw that 8.7% COLA increase, which I know made a lot of headlines not quite as significant this year, but there is still a little bit of a bump, right? There

Ryan (06:09):

There is, yeah. That 8.7% was wonderful news after the inflation that we had been experiencing for sure. This year it's going up 3.2%, so not bad. We'll certainly take it. If you look at the average retirement benefit, it's going up by $59 a month. So that's going from $1,848 up to $1,907 here starting in January. So that is definitely welcome news for sure.

Ben (06:38):

Alright, and then with the Social Security earnings test, I know for people that are still continuing to work a little bit, while they are claiming their Social Security benefits, does anything change on that front?

Ryan (06:48):

So the brackets have increased there as well. And so the interesting thing there is that can be nice if you're wanting or if you have already taken your Social Security benefits and you haven't yet reached your full retirement age, and you're continuing to work, because now you can make a little bit more money and your benefits won't get withheld. So for instance, if you're 62 and you turn on your Social Security benefits now, whereas last year in 2023 you could make up to $21,240. Now you can make up to $22,320. So you got an increase there of over a thousand dollars. So that's definitely a nice little increase. Now I say that and I mentioned that, but I almost say that with a little bit of caution because if you're continuing to work and you haven't yet reached your full retirement age, most likely you probably don't want to turn on your Social Security. Obviously it's going to be a case by case basis with you, but there's a lot of other factors that you need to consider, not just what that earnings limit cap is.

Ben (07:56):

Alright. And there was also a little bit of a change in the maximum wage base for Social Security as well, right?

Ryan (08:02):

Yeah, is, I mean obviously that's one of the pieces here that we're talking about. That's not welcome news, but it is what it is. It goes along with the increase in inflation or the adjustments that we have. So now for those that are still working, you have to pay Social Security taxes on up to $168,600 of earnings. So that's a pretty significant increase from the year before. It was $160,200, so that's over $8,000 an increase and you got to pay 6.2% on that, and if you're self-employed, you're paying both ends. So that's an additional 12.4% on that additional amount of money.

Ben (08:49):

Well, I know when you talk about changes that maybe we don't welcome as much or don't get excited about Medicare falls into that category as well, right? No surprise that there are some rising costs as a result with Medicare. Right?

Ryan (09:02):

No doubt about it. I mean, in this year what we're seeing is that Medicare Part B rate is going back up. I think the percentage, if I did the math here is going up about 6%, but it's overall, the premium isn't going up tremendously. It's going from $164.90 now up to a $174.70 for most people. Now, some people have to pay more for that if your hit with IRMAA, which is the surcharge that you have to pay for Medicare if your income exceeds certain limits, but most people won't have to pay that. The other thing that comes into play here too with Medicare, the other thing that's gone up is that annual deductible has gone from $226 now up to $240. So nothing real substantial, but the tough thing there is that you get that increase with Social Security and then they take a little bit more away from you on the Part B side. So some good and some bad here, right?

Ben (10:07):

Yeah, there's always a little bit of good and bad as it relates to these things. So we take both in stride and plan accordingly. So if you have questions as we kind of go through this and talk about some of these updates and changes for 2024, again, you can call Ryan at Cravitz Financial at 7 14-462-9155 or just want to sit down and ask specific questions about the year ahead with him. You can always do that again by logging on Alright, so the 529 plan, always a great tool for saving for college. I know a lot of parents and grandparents utilize this. There's some good news this year, I know we've been talking about this, it's been on the radar for a couple of years now, but starting this year you can actually start moving that money into a Roth potentially, right?

Ryan (10:51):

Yeah, which is definitely nice because some people have some unused money or they will have some unused money in these accounts. So having the ability now to take or take some of that and be able to move that over to a Roth IRA is definitely helpful. Now, there's some restrictions that are in here. For instance, there's a $35,000 cap, and then each year you can only move over up to the limit of what you can put in into a Roth IRA. So if you're allowed to put in let's say $7,000 because you're under 50 and you have $21,000 in that 529 plan, well you could do $7,000 this year, $7,000 next and $7,000 after that and then finally get that money moved over. So there's definitely some restrictions here, but at least there's a little bit more flexibility on being able to get that unused money out of those accounts.

Ben (11:50):

Yeah, no, it's great news to be move some of that, but it is important to be aware of those limits, right? Because I know for people that might've been saving for a long time that maybe has a kid decide not to go to college or not go as long as they expect or not have to spend as much as expected. You aren't able to move all that money. So just something to be aware of,

Ryan (12:09):

You're not, and again, there's definitely restrictions here. One other thing too I should mention along those lines is that 529 account must have been open for at least 15 years. So just another thing to keep in mind,

Ben (12:23):

This one to me feels like it's bigger on paper and the headlines and it actually will when it comes down to impacting your financial plan, but it is still nice to have that option for some of that money if nothing else. Alright, let's move on to 401(k) contributions. What do we need to know here? Ryan is much change in this aspect.

Ryan (12:42):

So now you're allowed to put away a little bit more money into these accounts, you could put away an additional $500. So not a ton, but it's nice. I mean, definitely something that you want to take advantage of if you can afford to put that money away. Now the limit is 23,000 and if you're over 50 you have that ketchup contribution for another $7,500 on top. So you're talking $30,500 that you can now put away into these accounts. So again, if you could afford to do it, definitely take advantage

Ben (13:14):

Of it. Well, I know we've had some bumps in recent years in terms of catch up contributions for people who are over 50, but that's not changing, correct?

Ryan (13:22):

It's not, no, it's still the same amount. That's $7,500.

Ben (13:25):

Okay, good to know there. So maybe a little chance to stock away a little bit extra money in your 401(k), which would be nice. Also, another nice change maybe for people that want a little bit more flexibility with those 401(k) accounts and withdrawals. There are a few more exceptions that have been added, right? Yeah,

Ryan (13:43):

There's multiple different exceptions to the early withdrawal rules for 401(k)'s. Generally speaking, you can't access the money until 59 and a half without a 10% penalty, but there's a few more exceptions that they've added on. For instance, one of 'em now allows people who have experienced a personal or a family financial emergency to withdraw up to a thousand dollars a year and avoid paying the 10% penalty. So nothing huge, but it is an additional change. Those who take advantage of this opportunity can take up to three years to then repay the amount that's borrowed from the 401(k). So again, nothing huge, but it is a nice addition. And another new exception is going to allow domestic abuse survivors to now make small withdrawals from their 401(k) plans without having to pay that 10% penalty on early distributions. 401(k) participants can just go ahead and self-certify that they experienced domestic abuse to make that penalty-free withdrawal and the amount is either the lesser of $10,000 or it's 50% of whatever the account is.

Ben (14:57):

Alright, let's stick within then some retirement plans and accounts here and talk about some contributions for the IRA, the Individual Retirement Account. There are some small changes there too, right?

Ryan (15:08):

There are. So you can put away an additional amount here. So now if you're 50 or older, you can put up to $8,000 now into an individual retirement account and IRA for a tax year 2024. So that $8,000 includes the thousand dollars catchup that's available for those over 50. So if you're under 50, you're looking at $7,000 for this year. Now by the way, you can still make contributions for 2023 tax year. The deadline to do it is April, 15th, 2024.

Ben (15:44):

All right, let's just turn to RMDs Now, Required Minimum Distributions. I think it's good to kind of catch us up on where we stand with these because I know this has been an area where a number of changes have taken place with the Secure Act and secure Act 2.0. So what do we need to know for RMDs and ages heading into 2024?

Ryan (16:01):

So there's a lot to RMDs and a lot you need to be aware of to avoid penalties and know what you're doing here. But some key things to consider are that if you'll turn 73 in 2024, you have until April 1st, 2025 to make your first RMD. Now, anyone who's already 73 or older by the start of 2024 must make their withdrawal by the year's end. Now, the penalty for failing to take your RMD in time is 25% of the amount by which your withdrawal fell short of that required minimum that can be reduced to 10% if you make good the full withdrawal and file a revised tax return in a timely manner. So those penalties, 25% and 10% might steam a little steep. But keep in mind, the year before we were looking at 50%. So at least that's welcome news that that has gone down.


The most important thing is just to make sure that you don't miss any RMDs and understand how those RMD rules work. Now, most people that are subject to RMDs must make their withdrawal for the tax year by the last day of that year, and in your first year of eligibility, however, you have up until April 1st of the following year. Now, secure Act 2.0 is what bumped the mandatory age for starting RMDs from 72 to now 73 effective in 2023. So last year the minimum age will ultimately go up to 75, but it's not going to do that until January 1st, 2033.

Ben (17:39):

All right, so important to be aware of RMDs, know when to take 'em and have a strategy for how to do so as well. That's always very important. So again, with any of these items, if have more questions, want to follow up, determine what needs to be done on your end for your financial plan and as you get prepared for retirement or even if you're in retirement, again, you can log on You can schedule a meeting with Ryan through the website or you can call 714-462-9155. Ryan, let's turn to a couple of listener questions before we get out of here. I know this has been a very informative episode, but I think closing it out with a couple of questions will be a great way to kick off the new year as well. So got two for you. Let's start with this one. I'm 67, so I've reached full retirement age for Social Security, but I don't have plans to retire anytime soon. Should I go ahead and start my Social Security now or should I just wait until I'm done working?

Ryan (18:31):

Well, so a few things to consider. I mean, you're now 67, so at least you're at your full retirement age. So you can work and you can take your Social Security and they wouldn't withhold your Social Security benefits. So you do have that going for you. But if you're working and you're making enough money from working alone and you don't need Social Security, you don't need that for income right now today, it can make a lot of sense to wait until 70 because keep in mind you earn 8% delayed retirement credits for each year that you delay past your full retirement age. And if you're married, you also want to factor that in because remember, when one of you passes away, you're going to lose a Social Security check, you lose the smaller of the two and you keep that larger one. So let's say that you have the larger one, I don't know, but I'm just going to make the assumption here. If that were the case, it can make sense to increase that benefit that's going to be that survivor benefit for whoever is going to survive the other. And of course, the other thing too is I mentioned all the time that Social Security is tax advantaged. So unlike other income sources, Social Security in and of itself is not taxable. Now, there are other tax free sources of income and such, but Social Security is definitely unique in the fact that if you just have Social Security, you're not paying taxes, at least not on the federal level. And most states don't tax Social Security and California is one of them.

Ben (20:04):

Alright, great question. Let's go with one more here, Ryan. I've spent 40 years saving and investing and now that I'm about to retire, I can't even comprehend the notion of turning things in the other direction and taking money out of savings instead of putting it in. I know this is something that people do all the time. So why does this terrify me so much?

Ryan (20:21):

Because you're human. This is so normal, and I find this happens so often. It is actually, I believe the people that have been the best savers over the years are the ones that have the hardest time becoming spenders in retirement. I was working with a client of mine over the course of the last year. They had retired probably about six months ago now, had over a million dollars in their retirement savings and had Social Security going, but we're short like a couple thousand dollars a month, and we're thinking you could sense that little bit of panic, where do I get that income? And it's, we've got over a million dollars here in the savings and sometimes it's a hard adjustment making that transition from saying, okay, I've got that paycheck that I've had coming to me every two weeks for maybe 40 years like you're talking about here in this case.


And now all of a sudden you get into retirement and you don't have those paychecks. You might have Social Security, you might have a pension, but then typically most people have a 401(k) or other types of retirement savings. And it's how do I turn this into income and so that I can feel confident that I can spend this money and I can enjoy myself and enjoy my retirement. You've worked hard, you've probably have saved well, and now it's about creating a plan that gives you confidence so that you can spend that money and enjoy yourself.

Ben (21:47):

Yes, important to know that that is a normal feeling when you're moving. Changing mindsets completely can be very difficult. So it's okay. That's why you want to plan, right, Ryan? So you're able to spend with confidence and not worry about those, the things that have kept you up at night for your entire life. It's time to enjoy all the hard work you put into it.

Ryan (22:05):

Yeah, there's no doubt about it. I always say having that plan is what gives you that confidence. Knowing what your expenses are, knowing what you have to meet that is what gives you that confidence to spend and enjoy yourself. And quite frankly, you deserve it. You've worked hard for 40 years.

Ben (22:21):

Absolutely. Well, if you want to have that confidence, that peace of mind, the best thing to do is to start putting that plan in place. If you haven't done so already, you can always log on, learn more about Cravitz Financial, how they can help you and plan for retirement. But again, if you have questions about that or anything we discuss today in terms of updates and changes that are coming down the pike for 2024, you can always reach out to Ryan at 714-462-9155. All in all, very good update, Ryan. I know not some huge, huge changes, but some small things that can maybe go a long way over the course of your retirement. So good to know about them now and start planning for those things. So thanks for the update today.

Ryan (23:01):

Absolutely good talking to you.

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