Planning for retirement has a new look in 2024, thanks to changes brought about by Congress. Retirement savers this year will find fresh things to consider when it comes to rainy day savings, 401(k) contribution limits for older workers, rules on mandatory withdrawals for Roth 401(k) plans and student loan payment matches. At the same time, many retirement planning tips concerning Social Security, risk, location, inflation, healthcare costs, working in retirement and the value of good advice remain evergreen. If you want the latest up-to-date tips on saving for retirement, speak with a financial advisor.
New Retirement Tips for 2024
First, let’s look at some new features on the retirement scene. The Secure Act. 2.0 enacted in 2022 made significant changes to the way we can save for retirement. Here are tips relating to some of these new abilities:
- Check to see if your employer’s defined contribution saving plan offers Roth accounts that act like emergency savings accounts. These new additions to the retirement toolbox allow contributors to put in up to $2,500 annually and make four withdrawals a year free of taxes or penalties. Plus, employers can match contributions.
- Save for retirement by paying student loans. When employees make payments toward student loans, employers can now make matching contributions to their retirement plans. This lets workers reduce education debt while staying on track with retirement savings.
- Save in a Roth 401(k) without worrying about required minimum distributions (RMDs). Until this year, workplace Roth account holders had to start taking RMDs by age 73. Now they can leave money in the accounts until they are ready to withdraw it.
- Save more in your 401(k) if you’re age 60 to 63. This one actually won’t be available until 2025, but after the last day of 2024 workers aged 60 to 63 can make a special catch-up contribution of the greater of $10,000 or 150% of the standard catch-up limit for that year. After that, the limit adjusts annually for inflation.
Retirement Tips That Never Grow Old
In addition to these new tips, consider these tried-and-true bits of advice for retirement savers:
- Delay Social Security. Waiting to claim Social Security past age 62 raises your monthly benefit amount. It’s not always the right move for every saver, but it is wise to at least consider waiting until full retirement age or beyond.
- Understand sequence of returns risk. If you retire during a bear market and start withdrawing from retirement accounts, you may run out of money before you planned. This is due to sequence of returns risk and, aside from not retiring when markets are slumping, you can manage it by using conservative investment earnings estimates and diversifying your portfolio.
- Choose the right place to retire. Where you retire has a major effect on your post-retirement living expenses. If you pick a location with low costs, you can have a more comfortable and secure retirement without having to save more while you are working.
- Account for inflation. The spike in 2022 to an annual 8.7% rate reminded everyone how rising prices can erode the purchasing power of hard-earned savings over decades. You can cope by using inflation-fighting investments such as stocks and short-term bonds, and being ready to reduce spending if need be.
- Plan for healthcare costs. Medical bills generally rise as we age, and a well-thought-out retirement plan will prepare for that eventuality. You can do this by saving now in a health savings account, budgeting for higher Medicare Part B premiums later and seeing if you can fit premiums for long-term care insurance into your budget.
- Work if you want to. Just because your career is complete doesn’t mean you must or should quit working. Part-time employment in retirement can bring satisfaction as well as supplying income to help you stretch out savings or pay for luxuries.
- Get good financial advice. These tips barely scratch the surface of the knowledge it takes to prepare a solid plan for funding retirement. And there’s no better way to ensure you are well-informed on this vital topic than to get the guidance of a financial advisor.
Bottom Line
To plan effectively for retirement in 2024, be aware of new opportunities to build emergency savings, make 401(k) catchup contributions, avoid RMDs and use employer matches of your student loan payments to fill your retirement accounts. Also keep in mind time-tested tips on timing your retirement and claiming Social Security, preparing for inflation and health costs, picking the best retirement location, using part-time work to expand your options and, finally, getting the best financial advice you can find.
Tips for Retirement Planning
- Stay up to date on the latest in financial planning by working with a financial advisor. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you canhave a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- It’s always a good idea to know whether you’re saving enough for retirement, and SmartAsset’s retirement calculator can give you the answer.
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FAQs
While it's always a good idea to start planning for retirement as early in your career as possible, the five years before retirement are often considered the most critical. By getting a handle on where you stand today, you'll have a better understanding of what that means for your financial wellbeing in retirement.
What the last five years before you retire are critical? ›
While it's always a good idea to start planning for retirement as early in your career as possible, the five years before retirement are often considered the most critical. By getting a handle on where you stand today, you'll have a better understanding of what that means for your financial wellbeing in retirement.
What is the 3 rule in retirement? ›
In some cases, it can decline for months or even years. As a result, some retirees like to use a 3 percent rule instead to reduce their risk further. A 3 percent withdrawal rate works better with larger portfolios. For instance, using the above numbers, a 3 percent rule would mean withdrawing just $22,500 per year.
What is the 95% rule retirement? ›
Under the Rule of 95, members can retire when their age plus their years of service equal 95 provided that they are at least 62 years old. For example, a member who is 62 years old could retire with 33 years of service rather than waiting until their schedule-based eligibility date (62 + 33 = 95).
What is the 25 times rule for retirement? ›
If you want to be sure you're saving enough for retirement, the 25x rule can help. This rule of thumb says investors should have saved 25 times their planned annual expenses by the time they retire, according to brokerage Charles Schwab.
What is the biggest retirement regret among seniors? ›
Some of the biggest retirement regrets include: A vague financial plan. No retirement goals. Counting on long-term employment.
What is the average life expectancy after retirement? ›
According to their table, for instance, the average remaining lifespan for a 65-year-old woman is 19.66 years, reaching 84.66 years old in total. The remaining lifespan for a 65-year-old man is 16.94 years, reaching 81.94 years in total.
What is the $1000 a month rule for retirement? ›
One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.
What is a good monthly retirement income? ›
Let's say you consider yourself the typical retiree. Between you and your spouse, you currently have an annual income of $120,000. Based on the 80% principle, you can expect to need about $96,000 in annual income after you retire, which is $8,000 per month.
How long will $500,000 last in retirement? ›
Summary. If you withdraw $20,000 from the age of 60, $500k will last for over 30 years. Retirement plans, annuities and Social Security benefits should all be considered when planning your future finances. You can retire at 50 with $500k, but it will take a lot of planning and some savvy decision-making.
WASHINGTON – The Biden-Harris administration announced today that the U.S. Department of Labor has finalized its Retirement Security Rule to protect the millions of workers who are saving for retirement diligently and rely on advice from trusted professionals on how to invest their savings.
What is the golden rule for retirement? ›
The golden rule of saving 15% of your pre-tax income for retirement serves as a starting point, but individual circ*mstances and factors must also be considered.
What is the golden rule for pensions? ›
With the golden rule, the ratio between your coordinated wage and the projected old-age pension at the time of ordinary retirement always remains the same, regardless of whether the rates are 1% or 2%. The golden rule is essential for calculating the appropriateness of pension plans.
Does retirement double every 7 years? ›
Assuming long-term market returns stay more or less the same, the Rule of 72 tells us that you should be able to double your money every 7.2 years.
What is the 1000 hour rule for retirement? ›
For decades, tax-qualified retirement plans could exclude employees who work fewer than 1,000 hours of service per year, even if the employee worked for the employer for many years. Employees who worked over 1,000 hours generally could not be excluded from the plan (with certain non-hours-based exceptions).
What is the 5 year rule for retirement? ›
The 5-year rule applies to withdrawals from Individual Retirement Accounts (IRAs). The 5-year rule regarding Roth IRAs requires a waiting period before you can withdraw earnings or convert funds without a penalty.
How do you survive the last 5 years before retirement? ›
6 Things to Do If You're Nearing Retirement
- #1: Find out where you stand.
- #2: Boost your savings, if you need to.
- #3: Plan ahead for Social Security.
- #4: Consider tax-smart strategies now.
- #5: Get a head start on future health care costs.
- #6: Start thinking about retirement income.
We: Base Social Security benefits on your lifetime earnings. Adjust or “index” your actual earnings to account for changes in average wages since the year the earnings were received. Calculate your average indexed monthly earnings during the 35 years in which you earned the most.
What age is most common to retire? ›
While the average retirement age for workers in the United States is 64, that number varies as a result of many factors, including your Social Security benefit, your retirement savings, any pensions you might have, and even the lifestyle you want to live in retirement.
How do you know when it's time to retire mentally? ›
Persistent feelings of sadness, anxiety or depression related to work can indicate that it's time to prioritize your mental and emotional well-being. Retirement offers a chance to focus on self-care and pursue activities that promote happiness and fulfillment.
