Year-End Countdown: Boosting Your Retirement Savings

Ed Riley
Nov 20, 2023
2 min read

Before the year wraps up, assess the potential benefits of increasing your retirement account contributions and satisfying your RMD obligations. Now is an excellent opportunity to strengthen your retirement accounts and ensure you're optimally positioned for the future. As we approach the year's-end, consider enhancing your retirement savings plans, and, if applicable, fulfilling your RMDs.

What proactive steps can you take with your retirement accounts before 2024?

401(k) Contributions: Until December 31, individuals under 50 can contribute up to $22,500 for the 2023 tax year. If you're 50 or older by year-end, the limit increases to $30,000. For IRAs, the contribution deadline extends until the April 2024 tax-return filing, with a maximum of $6,500 or $7,500 if you're 50 or older.
Self-Employed Options: If you're self-employed, explore the potential to contribute even more to your retirement account. Sole proprietors can make employee contributions to their solo 401(k) until the April 2024 tax-filing deadline. The total contribution limit is $66,000 (or $73,500 if you're 50 or older). SEP IRA contributions, capped at $66,000 for 2023, can be established and funded until the April 2024 tax-filing deadline.
Required Minimum Distributions (RMDs): If you turned 73 in 2023, the deadline for your first RMD from traditional IRAs and 401(k) plans is April 1, 2024. Otherwise, this year's RMD must be taken by December 31, 2023. Be mindful that delaying the first distribution until 2024 results in two RMDs that year, potentially impacting your tax bracket.
SECURE Act 2.0 Changes: The recent SECURE Act 2.0, implemented in late 2022, reduced the penalty for missed RMDs. While the penalty is lowered to 25% (or 10% if corrected promptly), it remains a significant portion of your retirement savings. Accurate calculation is crucial, and your plan provider or IRS worksheets can assist in determining your RMD based on your year-end account balance and life-expectancy factors.

Taking these pro-active steps now will not only fortify your retirement plans but also position you for more financial success in the future!