10 Ways to Supercharge Your Financial Plan in 2024

December 28, 2023

In this episode, Matt Blocki and Jamison Smith discuss their top 10 tips that can impact your financial planning for 2024. With the IRS adjusting its limits to account for inflation, it’s essential to stay informed about these changes and how they can affect your financial future. They discuss 401(k)s and the nuances of the 402(g) and 415(c) limits, Roth IRAs, Social Security tax changes, HSA contribution limits, tax brackets, estate planning, 529 plans, the standard deduction and more! Matt and Jamison provide practical tips and strategies for optimizing your financial plan, whether you’re a high-income earner or looking to secure your family’s financial future. Tune in and share this episode with friends and family who want to make the most of their financial journey and have financial clarity.

Episode Transcript

Welcome to EWA’s Finlit podcast. EWA is a fee only RAA, based out of Pittsburgh, Pennsylvania. We hope all listeners of this podcast will benefit as we deep dive into complex financial topics that we will make simplified for you. And we hope that this really serves as a catalyst so that you can make the best financial planning decisions for your family and also save time them. Thanks for joining, everyone. Today, we’re talking about ten tips to put your financial plan on great track for 2024. Every year, the IRS adjusts their limits with inflation, and so we’re going to talk through the limits that have changed and how you can take advantage of these. So first thing first is 401. There’s a couple of parts that go into it, what’s called a 402 G limit, and then what’s called a four one five c limit.


So, Jameson, you give the 402 G. How has this changed and what are the options there? And then I’ll go on the total bucket of the four one five c limit.


402 G is what most people are familiar with at your salary. Deferral. So 20, 23, 22,524 if you’re under the age of 50, increase by $500 will be 23,000. If you’re over the age of 50, you get a $7,500 catch up, which didn’t change. Yeah, it’s the same. So basically, you get an extra $500 to put in, and that can be roth or pretax, that deferral from your salary.


So make sure you go in, you’re putting an extra $41 and change per month into your four hundred and one k plan, whether that’s Roth or pretax. Now, the big change happened to the four one five c limit. So the four one five c limit, when you put into 401k, most people think, can I only put in that 2024, that 23,000 some people think the match is part of. It’s not part of that. 23,000 is your money you can put in. You get a match, let’s say 3%. If your income is 300 grand, that’s 9000. And then above and beyond that, you can go all the way up to 66,000 in 2023, if there’s an after tax option, which then is the mega back to a Roth, because you convert that to a Roth.


But in 2024, the total bucket is going to 69,000 a year. So if you think about your 401k as a giant bucket, but just a couple of compartments in it, like one bucket you put in with water, let’s say that’s your Roth money. The second is Gatorade. Let’s say that’s the match. Then the third is a profit sharing. Your company is. Maybe that’s cranberry juice, I don’t know. And then the fourth thing is the after tax, which you can put in which, whatever. Those total four compartments as a whole bucket. If structured properly, you can get $69,000 per year, if you’re under 50, into your four hundred and one k plan if you’re over 50. Quick math. You can do 76,500 into your 401k in 2024. This is asset protected. It’s tax efficient. The Roth money obviously grows.


It’s tax free after it’s been in there five years after retirement. If you convert it to a Roth IRA after five years, you can get it out totally tax free, penalty free, no income taxes on the growth moving forward. Incredible. We recommend take advantage of these limits if your cash flow allows. Make sure you’re maximizing not only the traditional salary to throw in your 401K, but also the total bucket if your cash flow allows.


So, water, cranberry juice, Gatorade, and maybe like a seltzer water, it might be a good mocktail.


The fourth compartment, after taxes, seltzer water.


Just to have to get a little.


Bit carbonation, keep the calories down. Gatorade zero two I used.


Anyway, went into great detail in our mega backdoor Roth podcast and how this.


Yeah. Reference the mega backdoor Roth. We go into great detail how that works. So there’s two different universes in retirement accounts. There’s the 401K universe, 403 B universe. Those are all in the same from how much you can put in. 401K just is tied to your employer. 403 B means you work in a non for profit. 401K means you work for a for profit. Well, there’s this totally separate universe that exists that’s not tied to your employer, and that’s why it’s called IRA, which stands for individual retirement account. An individual retirement account you can have on top of your 401k. There are income limitations. However, the big thing is, for Roth IRA in 2023, you could put in $6,500. That also is going up $500, which actually a big increase. That’s almost an 8% increase, and that’s going up to $7,000 a year.


And that’s under the age of 50. If you’re over age 50, you can put up to $8,000 per year with the $1,000 catch up. So there are income limitations. Most of our clients are above this so if you don’t have aggregation and you don’t have any traditional IRA money out there, you can do what’s called a backdoor Roth Ira. You put it into a traditional IRA first, you forego the tax deduction, you convert it to Roth, fill that out on form 86, six on your tax return, and boom, you have money completely legally inside of a Roth IRA, despite being above the income limits to get it in. So James said, any difference, a traditional IRA. Just hit on this real quick.


Is there any difference in what someone could do in a traditional IRA versus a Roth IRA, which, if your income is low enough, you could technically take the tax deduction?


From a contribution standpoint? No. It went up to $7,000. Catch up if you’re over the age of 50.


Okay, awesome. So that’s tip number three. Tip number four. This is really super important for high income earners. So let’s say you’re a surgeon making half a million dollars at a hospital with a 3% match. Does that mean you’re getting 3% of 500,000 or 15,000 of a match? Or how does that work?


No, it’s only on a portion of your income, which is the technical term, is the maximum includable compensation limit. 2023 was $330,000. So what that means is if you make half a million dollars a year, your employer is only matching on your 1st $330,000 of income, 2024. That’s going up to $345,000.


Okay, awesome. Okay, so here’s the bad news. Something you should be aware of. Social Security taxes limits are going up from 160,200 up to 168,000. That means, let’s say, hypothetically, you’re that $500,000 surgeon. Hypothetically, every January, your paycheck goes down. Why? Because 6.2% Social Security tax hits you until you’ve earned 160,200 for the year, where that limit is going up to 168,000, so the government can get more money in the Social Security system. So again, that’s 6.2% of your w two wages up to a limit now, in 2024 of 168,000. Once that limit is reached, if you make above that on annual basis, then your paycheck goes up because that security tax, Social Security tax drops off. That’s tip number five, so be aware of that. Jameson, what’s tip number six?


Health savings accounts have increased. So married filing joint 2023 limit is $7,750. And it went up slightly to $8,350.


Perfect. And if you’re single, it’s a little bit less than half for both of those numbers. Why it’s not exactly half, we don’t know.


But tip is, make sure you’re maxing that out. Get the extra $500. Extra $600.


Absolutely. Now, good news for high income earners with inflation, that the federal taxes work on a graded basis. You get the 1012, 222-432-3537 percent. And the 35% rate now starts on anything above 487,000. And the 37% rate starts now on anything above 731,200. So there will be a little bit of relief from a tax perspective, where it takes a little bit longer for those higher rates to be incorporated. If, for example, you’re a million dollar income earner, you now have a bigger Runway before you technically hit the top.


Tax rate, I think 2023, that top tax rate. Married joined 693.


Yeah, it was almost seven. So that’s another 30,000 that gets taxed at 2% rate. That’s about $600 back in your pocket for your high income earner above those limits, just in that top rate. And then there’s some relief along the way as well. It’s not huge, but a couple of grand or something. Okay, so let’s talk about estate planning. So, a lot of our clients gift into trust on annual basis. A lot of our clients gift into help their kids fund Roth iras, help them max out their 401k. So in 2023, there was a $17,000 per year limit that you could gift tax free. It’s unreportable. It doesn’t go against your lifetime exemption. So, speaking of what adjustments are now in place for 2024, both on annual gift exclusion and then a total estate exclusion if someone passes.


So, annual went up $1,000 from 17,000 to 18,000. And the big estate exclusion went from. This is just over 13,000. Yeah.


Now it’s 13.61 million. But that cuts down 2026. That goes in half. That was a Trump tax code that gets taken away in 2026. And those limits have really been discussed with potentially even going lower, depending on who’s in office. So, estate planning, if you have a high net worth and making sure anything above those limits doesn’t get taxed at 40%. So using those gifting exclusions, getting stuff in irrevocable trust, titling, et cetera, those all become very important conversations. Okay, the next one is annual 529 plans. This goes right along with those gifting exemptions. So now you can do 18,000 per year. So if you’re a married spouse and you have a kid, the husband can put in 18,000 a year. The wife can put 18,000 a year. That’s 36,000 a year. They can put in to the 529 for the kid.


And then also you have the five year acceleration. You could technically, each spouse could put at 90,000 at once, 180,000 all up front. And then the 10th tip then is the standard deduction increase. So, Jameson, tell us about that, because most people, majority of Americans do take the standard deduction. They don’t itemize because of how high the standard deduction is.


Yeah. Which went up slightly. So married filing joint 2023 is like 27 and some change. 2024 be $29,200. Single tax filer is up to $14,600. So that’s just basic deduction. You get off your income if you do not itemize your deductions.


Excellent. Well, if you’re an EWA client, please expect us to reach out. We’re going to make sure your financial plan fully takes advantage of all these limits. Tax projections on what your income, cash flow is going to look like with the tax changes, inflation adjustments. So we will be in touch soon. And if you’re not an EWA client, if you have any questions, feel free to reach out to us. Thanks for joining. Thanks for tuning in to our podcast. Hopefully you found this helpful. Really hope this is as beneficial and impactful to as many people across the nation as possible. So hit the follow button, make sure to rate the podcast, and please share with any friends or family members that would also find this beneficial. Thank you very much.

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