Strategic IRA Planning in 2024

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Strategic IRA Planning in Your Gap Years

If you are in your 60s, you may want to take advantage of your Gap years and do some strategic IRA planning. The Gap years are between your retirement age and when you start taking required minimum distributions from your IRA or other retirement plans. These years can be a time of lower tax rates, so it may make sense to take some distributions even if you don’t need the income. Roth Conversions can really make sense here, as well. This is a time of historically low tax rates. Consider a strategy to take advantage and reduce your taxes in the future.

529 Plans to Roth IRA

In 2024, the Secure Act 2.0 now allows rollovers of 529 Plans to Roth IRAs.

A maximum lifetime limit of $35,000 per beneficiary can be rolled over. Additionally, the Roth IRA must be in the name of the 529 beneficiary, not the owner.

The 529 Plan must have been open for at least 15 years. The IRS has not clarified whether there is a new 15-year waiting period if the 529 Plan was transferred to a new beneficiary.

Amounts rolled over from a 529 cannot include any deferrals or earnings made in the previous 5-year time period.

Rollover amounts are subject to the annual Roth contribution maximum, $7000 in 2024. So, it would take 5 years at $ 7,000 per year to reach the full $35,000 limit. These rollovers will count towards the Roth IRA contribution limit annually. The beneficiary must also have enough compensation, equal to the rollover amount, to qualify.  There are no maximum income limits for either owner or beneficiary.  The same ordering rules apply as if rolled over from another Roth IRA.

Increase in SIMPLE IRA Amounts

Your contribution limits might have changed if you are still working and have a SIMPLE IRA at your employer.

If your employer has 25 or fewer employees, your limits have increased by 10%. Your new limit is $17,600, and if you are over age 50, the catchup amount is $3850.

If your employer has 26 to 100 employees, the extra 10% can be elected. But, only if they provide a 4% dollar-for-dollar match instead of the customary 3%

Also, employers can make an additional contribution to employees who earn at least $5000 for the year. The contribution can be up to 10% of pay with a $5000 maximum.

Ready to make the most of your IRA planning in your gap years or explore the new possibilities with 529 Plans and Roth IRA rollovers? For personalized guidance and answers to your IRA-related questions, contact Chris Robinson, ChFC, at RFG Wealth Advisory in Argyle, TX. Call 940-464-4104 to schedule a 15-minute call, or schedule online at RFGWealthAdvisory.com.

 

Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.


“These materials have been independently produced by RFG Wealth Advisory. RFG Wealth Advisory is independent of, and has no affiliation with, Charles Schwab & Co., Inc. or any of its affiliates (“Schwab”). Schwab is a registered broker-dealer and member SIPC. Schwab has not created, supplied, licensed, endorsed, or otherwise sanctioned these materials nor has Schwab independently verified any of the information in them. RFG Wealth Advisory provides you with investment advice, while Schwab maintains custody of your assets in a brokerage account and will effect transactions for your account on our instruction.”

Investment advice offered through RFG Wealth Advisory, a registered Investment advisor. FINRA/SIPC.


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