As the new year unfolds, it’s prudent for federal employees to reevaluate their retirement plans in light of recent changes. From pay raises to tax adjustments, understanding these updates can help optimize your financial future.
2024 Pay Raise For GS Workers
One of the headline changes is the federal pay raise effective January 2024. Marking the largest increase since 1980, GS employees are set to receive a 4.7% base pay raise, bolstered by a 0.5% locality pay increase. Concurrently, military members will see a 5.2% raise through the 2024 National Defense Authorization Act (NDAA).
Higher Tax Brackets
In response to rising inflation, income limits for tax brackets have been raised in 2024, providing some relief for federal workers and retirees. While the 5.4% increase is less than the adjustment seen in 2023, it’s essential to note that Trump-era tax cuts are scheduled to expire by December 31, 2025. Seeking professional advice on tax planning before potential increases is advisable, especially for those nearing retirement.
End of RMDs for Roth TSP
Effective January 1, 2024, Roth Thrift Savings Plan (TSP) holders are relieved of the obligation to take Required Minimum Distributions (RMDs). This change is particularly significant as Roth contributions are made with after-tax earnings, rendering distributions tax-free. Encouraging federal employees to explore the benefits of Roth TSP for retirement savings.
Higher TSP Contribution Limits
With the new pay raise, consider leveraging the increased TSP contribution limits in 2024. The cap for retirement accounts, including TSP and 401(k), has risen to $23,000, while those aged 50 and above can contribute an additional $7,500 through Catch-Up Contributions.
2024 Tax-Deductible Limit for Long-Term-Care Premiums
For those considering long-term care insurance, take note of the updated tax-deductible limits for 2024. Depending on age, deductible amounts range from $470 to $5,880, providing potential tax benefits for planning coverage costs.
Seizing the Opportunity
To navigate these changes effectively, consider consulting with an FRC® trained advisor. With their expertise, you can tailor your retirement plan to capitalize on the latest updates, ensuring financial security and peace of mind in the years ahead.
