5 Major Changes Coming to Your 401(k) in 2024
The Secure Act 2.0 is bringing numerous changes to your 401(k) in 2024.
The 2022 legislation had over 90 provisions in it that encourage more people to save for retirement and to help grow their retirement savings.
This year we saw many of these provisions take effect. And there are more changes rolling out in 2024.
What are they, and how can you prepare? Keep reading to find out.
#1 No RMDs for Roth 401(k)s
Starting in 2024, participants in Roth 401(k)s no longer need to take required minimum distributions (RMDs). This conforms to the rule that already applies to Roth IRA account owners.
Read more about the 2023 RMD changes.
#2 Savings Accounts inside Your 401(k)
Starting in 2024, employee plan sponsors can now create emergency savings accounts for participants to contribute to a separate emergency savings account that’s part of the 401(k) plan.
Contributions are after-tax only, which means they must be put in a Roth 401(k).
This means, if you leave the company, the funds can be converted into a Roth investment account or withdrawn because your contributions are always yours to keep since you contributed after-tax dollars.
The rules are as follows:
- The savings account balance cannot exceed $2,500, and you can take up to 1 withdrawal per month.
- The first 4 withdrawals in a year must be penalty-free. Your employer can impose fees after that, but you’ll still have access to your money.
Your employer may also automatically enroll you in the emergency savings account, setting aside up to 3% of your compensation.
Contributions to this new emergency savings account will qualify for matching contributions to your 401(k).
#3 Penalty-Free Withdrawals for Emergencies
Starting in 2024, you will be allowed to take an early emergency distribution of up to $1,000 per year from your 401(k) to cover an unforeseeable or immediate financial need.
You can take $1000 per year for an emergency and NOT have to pay the additional 10% penalty that normally applies to early distributions if you are under age 59½.
Should you choose not to repay the distribution within a certain time frame, you won’t be allowed to take another emergency distribution for 3 years, unless you’ve returned the money.
#4 Penalty-Free Withdrawals for Domestic Abuse Victims
Under the SECURE Act 2.0, you may be able to make penalty-free withdrawals from your 401(k) in cases involving domestic abuse.
Domestic abuse victims under age 59½ can take up to $10,000 (or 50% of the account, whichever is less) from their 401(k)s without paying the 10% penalty.
While you’ll have to pay income tax on the withdrawal, you can receive a refund of the income taxes you pay on that withdrawal amount if you repay the withdrawal within 3 years.
#5 Employer Matches for Student Loans
Under the SECURE Act 2.0, your employer can now make a matching contribution to your retirement plan account based on your student loan payment amount, but not in excess of the total matching contributions available in the plan.
This is designed to address the fact that high student loan debt can keep people from saving for their retirement.
According to the rules, this is up to the discretion of your employer whether or not they add this benefit to the plan documents.
Maximize Your 401(k) Portfolio in 2024
401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance.
While we manage your 401(k) for you, we are not a robo advisor. Far from it.
We review and rebalance your account for you with the goal in mind of keeping you in what is working and out of what is not.
The best part? There are no in-person meetings required, and you don’t have to move your 401(k). Leave it right where it is, and we handle the rest.
Book a complimentary 15-minute 401(k) strategy session with one of our advisors to see how we can help you have a brighter retirement future.
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