How 2023 Will Affect Your 2024
There were several financial developments in 2023 that may have positive impacts on your 2024 financial strategy.
U.S. News and World Report article, 7 Things Retirees Should Be Thankful for This Year nicely describes some of 2023’s positive financial news.
The first positive is that account values generally increased in 2023. As of mid-November 2023, the S&P 500 was up around 18% year to date. That’s certainly a burst of good news for those whose accounts took a beating in 2022 when the index saw a decline of 19.5%.
Though while there’s likely to be continued economic uncertainty in the months ahead, the article explains that the positive year-to-date performance may reflect a strong overall market in the first weeks and months of 2024.
Changes to RMDs — or Required Minimum Distributions — was another dose of good news in 2023. Beginning in 2023, the age you must take your first RMD from a retirement account was increased to 73. That extra time may help you delay income payments and reduce your taxable income as well as providing longer tax-free growth within your accounts.
And don’t forget that the RMD age jumps to 75 in 2033.
2023 also saw a healthy 3.2% Social Security Cost of Living Adjustment which goes into effect in 2024. While that’s a lot less than the 8.7% increase that went into effect in 2023, it’s still a solid increase.
The AARP estimates that the 3.2% increase means an additional $59 a month for Social Security recipients. All told, that’s more than $600 more a year, which could help take some of the bite out of higher grocery prices.
The article next notes that late-2023 included an IRS announcement that 401(k) contribution limits are also rising in 2024. Specifically, the limit increases $500 to $23,000. And bear in mind that those 50 and older can contribute a catch-up contribution of $7,500, raising the limit for people in that age bracket to $30,500.
Note that your total contribution may not be more than your yearly compensation from the employer that sponsors your plan.
Those new limits are also applicable to similar employer-sponsored qualified accounts like 403(b)s and most 457 plans.
Within that same announcement, the IRS also touted that IRA limits will rise $500 in 2024 to $7,000. The IRA catch-up amount will remain $1,000 for those 50 and older. Those IRA contribution limits are the maximum you can contribute each year across both traditional and Roth IRAs. If you have a traditional and a Roth IRA, you can’t contribute more than that amount between both accounts in one given year.
2024 will also include higher savings interest rates. Because of the current rising interest rate marketplace, several banks are promoting savings accounts with rates as high as four or five percent, which the article notes is the highest consumers have seen in many years.
Higher rates may also mean bigger returns on annuities, bonds, Treasurys, and certificates of deposit.
Be sure to review your current strategy with your financial services professional to ensure you’re taking full advantage of these rising rates.