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2024 Tax Planning Guide

Plan for Retirement

Plan for Retirement

The steps you take today to prepare for retirement will shape your financial picture during your later years.


You have a variety of retirement savings vehicles to which you can contribute, depending on what your employer offers. These vehicles include traditional and Roth IRAs, Simplified Employee Pensions (SEPs), SIMPLE plans, and 401(k), 403(b), and 457 plans.


Contributing to most of these retirement vehicles may reduce your taxable income today while your money potentially grows tax-deferred over time. Time is key. The longer you contribute, the more likely you’ll be prepared for the retirement you want. At a bare minimum, you should try to contribute enough pay to take advantage of the maximum match your employer may make to your retirement savings account.


Review your retirement plan beneficiaries if you haven’t done so recently. You’ll help avoid unintended consequences by updating beneficiary designations for your retirement savings plan, annuities, pensions, and IRAs to account for life changes, such as marriage or divorce of a beneficiary.


Part-Time Employees May Participate In 401(k) Plans
Part-time employees age 21 or older who have worked 500 hours for three consecutive 12-month periods after January 1, 2021 are eligible to participate in retirement savings. As an employer, you aren’t required to match contributions. Some employees, including seasonal and union workers, aren’t eligible to contribute.


Roth IRAs
Roth IRAs offer several advantages you can’t find in other retirement accounts. While contributions are made after tax, qualified distributions are tax-free, and there are no required minimum distributions during your lifetime.


When changing jobs, roll over any retirement funds directly into an IRA to avoid tax and potential early withdrawal penalties and keep your retirement savings working for you.


Contributing to a Roth IRA makes sense if you don’t need the tax deduction now or want tax-free distributions later. Tax-free income from a Roth IRA may permit you to leave other retirement accounts alone until you must take RMDs from them.


Retirement and Helath Savings Plan Contribution Limits


*Adjusted Gross Income (AGI), not taxable income


You may also want to consider rolling over a traditional IRA to a Roth IRA to avoid paying higher tax rates in the future. This makes sense for people who may have a relatively down income year but have the liquidity to pay the tax bill for that year without tapping a retirement account. A rollover may not make sense if you’re in a higher tax bracket now and planning to retire soon. You could end up paying more tax now than you might after you retire.


Penalty-Free Withdrawals for New Parents
New parents may qualify for an exception to the 10% tax that usually applies to early distributions (prior to age 59 1/2) from IRA or 401(k) accounts. You can withdraw up to $5,000 per parent per eligible retirement account within a year of a qualified birth or adoption. You have the option to repay at a later date, but repayment isn’t required.


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