Bridging The Retirement Planning Savings GAP
Article written by Scott M. Kahan in Stroll Chappaqua - February 2024 Magazine
The prospect of retirement is a time that many look forward to, envisioning a period of relaxation and enjoyment after years of hard work. However, a recent report from the Congressional Research Service has shed light on a concerning reality: a significant majority of individuals are not saving enough for retirement.
In fact, according to the report, a mere 8.5% of those contributing to a retirement account managed to reach the maximum allowable limit, indicating a widespread struggle to prepare adequately for the future.
IRS Announces New Contribution Limits
Recognizing the urgency of addressing the retirement savings gap, the Internal Revenue Service has recently announced changes to contribution limits, set to take effect in 2024. The most notable adjustment is the increase in the maximum allowable contribution to 401(k) accounts, with workers now permitted to contribute up to $23,000 annually – a $500 increase
from the previous year. This adjustment also extends to other retirement savings vehicles, including the 403(b) plan, most 457 plans, and the federal government’s Thrift Savings Plan.
While these adjustments aim to empower individuals to save more for their retirement, it’s essential to acknowledge that simply increasing contribution limits may not be a panacea.
The root of the issue lies in the widespread failure to maximize existing limits, as evidenced by the low percentage of individuals reaching the previous thresholds.
Catch-Up Contributions
The IRS has maintained catch-up contribution limits for savers aged 50 and older at $7,500 to address the unique challenges that older workers face. This provision recognizes the financial hurdles individuals encounter as they approach retirement age, allowing them to bolster their savings later in their careers.
Expanding Opportunities with IRAs
The changes introduced by the IRS are not limited to workplace-sponsored retirement plans. Individual Retirement Accounts (IRAs) are also seeing increased contribution limits, with the cap raised to $7,000 for 2024, up from $6,500 in 2023. While this expansion provides more opportunities for individuals to save independently, it’s crucial to note that the catch-up contribution limit for IRAs remains at $1,000.
The catch-up contribution limit for individuals aged 50 and above participating in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has been raised
to $7,500, up from $6,500. Consequently, individuals aged 50 and older contributing to 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan can now contribute up to $30,000, effective 2023. Additionally, the catch-up contribution limit for individuals aged 50 and above participating in SIMPLE plans has been increased to $3,500,
up from $3,000.
What can you do in 2024
Planning properly for your future is the key! Identify your goals, including retirement. That is what we do at Financial Asset Management Corporation (FAM). We empower our clients to
make the best financial decisions now and in the future. Now is the time to start securing a comfortable retirement, bridging the gap between the current state of savings and the financial security needed for the golden years.
Planning Today -Securing Tomorrow!