Seven ways retirement will be different in 2024

Contribution limits also go up for people with workplace retirement plans. Those age 50-plus can contribute up to $30,500 this year to a 401(k), 403(b), and most 457 plans, or (for federal government workers) a Thrift Savings Plan. That’s $500 more than the 2023 cap. The contribution limit for younger adults goes up from $22,500 to $23,000.

Starting in 2025, there will be a new higher contribution cap for people ages 60 to 63.

4. RMDs

Required minimum distributions (RMDs) are a fact of later life for holders of most types of retirement savings accounts. (The notable exception is Roth IRAs, which are not subject to annual required withdrawals while the owner is alive. Starting with the 2024 tax year, this exception will also apply to Roth 401(k) and 403(b) accounts.)

The IRS uses a calculation based on the account balance and your life expectancy to determine the minimum you must take out each year. You’ll owe federal income taxes on the withdrawal, at your regular tax rate.

Most people subject to RMDs must make their withdrawal for the tax year by the last day of that year. In your first year of eligibility, however, you have until April 1 of the following year. SECURE 2.0 bumped the mandatory age for starting RMDs from 72 to 73, effective in 2023. (The minimum age will ultimately go up to 75, but not until Jan. 1, 2033.)

Thus, if you will turn 73 in 2024, you have until April 1, 2025, to make your first RMD. Anyone who is already 73 or older by the start of 2024 must make their withdrawal by the year’s end.

The penalty for failing to make your RMD in time is 25 percent of the amount by which your withdrawal fell short of the required minimum. That can be reduced 10 percent if you make good the full withdrawal and file a revised tax return in a timely manner.

5. Standard tax deduction

Most taxpayers take the standard deduction rather than itemizing on their tax returns. For the 2023 tax returns they must file by April 15, 2024, married couples in that majority can take $27,700 off their taxable income, up from $25,900 the year before. For individual taxpayers (single or married filing separately), the standard deduction increases from $12,950 to $13,850. Those filing as a head of household can deduct $20,800, up from $19,400 the previous year.

You get a bigger standard deduction if you or your spouse is 65 or older:

•  $1,850 more for a single filer or head of household (up from $1,750 for the 2022 tax year).
• $3,000 more for a couple filing jointly (up from $2,800).

6. Full retirement age

Congress voted in 1983 to gradually raise the Social Security full retirement age (FRA) from 65 to 67.  Four decades on, the change is nearly complete, with FRA reaching 66 and 8 months in the latter half of 2024.

For the past few years, FRA — the age when you become eligible to claim 100 percent of the retirement benefit calculated from your lifetime earnings — has been going up two months at a time, based on year of birth.

For people born in 1957, FRA is 66 years and 6 months. If you were born from July through December 1957, you will hit the milestone by the end of June 2024. The first children of 1958 will become eligible to claim their full retirement benefit in August. FRA settles at 67 for people born in 1960 or later.

You can start collecting retirement benefits before FRA — the minimum age is 62 — but your monthly payment will be permanently reduced, by as much as 30 percent.  You can also wait past FRA and reap Social Security’s bonus for delaying benefits: an extra 8 percent a year until age 70.

7. Social Security earnings test

If you claim Social Security retirement benefits before reaching FRA and continue to do paying work, your benefits may be temporarily reduced. That depends on whether your annual working income exceeds a set limit called the earnings test.

For 2024, that limit increases from $21,240 to $22,320 for beneficiaries who will not reach FRA until a future year. Social Security withholds $1 in benefits for every $2 in earnings above the cap.

If you will reach FRA this year, the income threshold is higher ($59,520, up by $3,000 from 2023) and the withholding lower ($1 less in benefits for every $3 above the limit).  When you reach FRA, the earnings test ends; there’s no withholding regardless of how much you earn, and Social Security recalculates your benefit amount to make up for the past reductions.