7 IRS Changes for 2024 That Will Impact Your Retirement Accounts

The U.S. tax code can be confusing, especially when considering the steady stream of changes that seem to appear each year.

In 2024, a slew of new rules could have an impact on your efforts to build a larger nest egg that will see you through your retirement years.

Following are a few important changes to keep in mind as you save for retirement this year so that you don't end up surprised.

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1. Maximum contribution amounts for 401(k)s have gone up

For the 2023 tax year, the maximum amount individuals could contribute to a 401(k) or Individual Retirement Account was $22,500.

This year — effective January 1, 2024 — retirement savers can put up to $23,000 in pre-tax dollars into their IRA.

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2. 403(b)s, most 457s, and Thrift Savings Plans maximum contributions have gone up

While 401(k)s are among the most common types of savings plans, they aren’t the only retirement savings options available.

You may have also been stashing money away in a 403(b), 457, or federal Thrift Savings Plan. If so, the same limit increase applies: You may contribute an extra $500 to your savings account this year compared to 2023.

3. Maximum Roth IRA contributions have increased

Unlike money saved in traditional IRAs, cash set aside for a Roth IRA is taxed preemptively rather than when you cash it out in retirement.

Contribution limits are different for Roth IRAs than traditional accounts, and the max contribution amount for Roths has gone up by 7.6% to a total of $7,000 for the year.

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4. Starter 401(k) plans are an option for small businesses that can’t afford to offer employee matches

Small-business owners can’t always afford to offer their employees 401(k) plans with employer matches. The IRA’s new starter 401(k) plan functions like a typical 401(k), but it doesn’t require employer matches.

Its limits are also lower: Employees may contribute up to $6,000 a year plus an extra $1,000 once they’re over age 50.

5. Students paying off federal student loans are eligible for employer 401(k) matches

Before this year, employees who were working on paying off their student loans needed to contribute to a 401(k) to qualify for any sort of employer match.

Thanks to new legislation, SECURE 2.0, as long as employees are paying off debt related to “qualified student loan payments” (tuition, fees, books, and expenses), they may receive matching retirement contributions counted as “elective deferrals.”

The same rules that apply to a company’s 401(k) employer match now apply to student loan payments, giving student loan payers the chance to start saving money.

6. There's no longer a 10% penalty for early withdrawals if you’ve experienced a financial emergency

Until this year, with very few exceptions, anyone withdrawing money from a 401(k) account before age 59.5 would have to pay a 10% penalty (on top of paying the taxes associated with the account).

However, with the 2024 changes, individuals are allowed to withdraw up to $1,000 a year if they or their families have experienced a financial emergency within the last year.

Based on the new rules, you don’t have to pay the 10% penalty as long as you pay the money back to the account within three years.

7. The 10% penalty is also waived for domestic abuse survivors

If an individual self-certifies that they were a victim of domestic abuse, they may make a withdrawal without paying the 10% penalty.

The total amount that may be withdrawn is either up to $10,000 or 50% of the total amount of money in the account — whichever sum is smaller.

Bottom line

IRS rules constantly change, and you need to stay on top of these shifting winds to avoid money stress when you retire. If you are unsure about how rules may be different in 2024, check in with your accountant.

Staying on top of these changes can help ensure you do not run afoul of IRS rules, you contribute the maximum to your nest egg, and you're able to supplement your social security .

Money tips that can work for everyone

No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.

Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.

Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.

Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).