You may want to tweak your retirement plan now that certain changes have gone into effect for 2024. From the federal pay raise to higher tax brackets, the new year brings opportunities to grow your nest egg.
2024 Pay Raise For GS Workers
The big news is the federal pay raise starting in January, 2024. The largest since 1980, it’s a 0.6% increase over the 2023 pay raise. All GS employees will get a 4.7% base pay raise before the 0.5% locality pay increase is applied. Add to this, military members are set to receive a 5.2% raise starting in January through the 2024 National Defense Authorization Act (NDAA).
Higher Tax Brackets For 2024
As a result of higher inflation, the income limits for tax brackets are higher in 2024. Although the 5.4% increase is less than the inflation adjustment for tax year 2023, higher tax brackets will continue to provide some tax relief for federal workers and retirees. Also keep in mind that Trump-era tax cuts expire on December 31, 2025. If you’re poised to retire soon, talk to professional about tax planning for retirement before taxes increase.
“Hopefully, this change will inspire more federal employees to consider the advantages of the Roth TSP for retirement savings.”
The End Of RMDs For The Roth TSP
Starting on January 1, 2024, you’ll no longer need to take Required Minimum Distributions (RMDS) from your Roth Thrift Savings Plan (TSP). Roth RMDs never made sense, anyway. Since contributions are paid with after-tax earnings, distributions in retirement are tax-free. Hopefully, this change will inspire more federal employees to consider the advantages of the Roth TSP for retirement savings.
Higher TSP Contribution Limit For 2024
Here’s a good cause for using your recent pay raise – take advantage of the higher TSP contribution limits in 2024. The limit for retirement accounts including the TSP and 401(k), has been increased to $23,000 while the Catch-Up Contribution limit is $7,500 for federal employees age 50 and older. You can make TSP Catch-Up Contributions in addition to your regular contributions if you’re age 50 or older, or turning 50 during the calendar year – even if you turn 50 on December 31st, 2024.
2024 Tax-Deductible Limit For Long-Term-Care Premiums
Since long-term care insurance premiums are tax-deductible, it’s something to consider when budgeting for the cost of coverage. For 2024, if you’re age 40 or under you can deduct $470, ages 41 to 50 can deduct $880; ages 51 to 60 can deduct $1,760; ages 61 to 70 can deduct $4,710; and ages 71 and older can deduct $5,880.
Connect with an FRC® trained advisor who can help you update your retirement plan to take advantage of the latest changes.
