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Financial Planning

New Tax Rules for 2024

The laws that stipulate how we must handle our personal tax situation are complex and dynamic. Changes can be built into existing statutes and shifting government priorities can also lead to adjustments to the rules.

For example, SECURE 2.0, the 2022 law designed to bolster retirement savings, has over 90 provisions with different effective dates.

Staying on top of what’s new in tax, and making the most of the changes, is an important part of the financial picture for most individuals.

Below are ten key changes in tax law for 2024:

  1. Standard Deductions: Married couples get $29,200 plus $1,550 for each spouse 65 or older. Singles can claim $14,600, or $16,550 if age 65 or older.
  2. Income Tax Brackets: Income tax rates are unchanged, but the tax brackets have widened out. For example, in 2023, income from $0 – $22,000 was federally taxed at 10%, and income from $22,001 – $89,450 was taxed at 12%. For 2024, the upper bound of the 10% bracket shifts to $23,200, and the 12% range adjusted to $23,201 – $94,300.
  3. Capital Gains Tax: Tax rates on long-term capital gains and qualified dividends do not change, but income thresholds to qualify for the various rates go up. For example, the 0% rate for capital gains applies at taxable incomes up to $94,050 for joint filers and $47,025 for singles.
  4. Payroll Taxes: The Social Security annual wage base for 2024 is $168,600, which is an $8,400 hike. The Social Security tax rate on employers and employees remains 6.2%, and both pay the 1.45% Medicare tax on all compensation, with no cap.
  5. 401(k): the maximum contribution is $23,000. People born after 1975 can contribute an extra $7,500.
  6. IRA & Roth Contributions: the contribution cap for IRA and Roth accounts is $7,000 for those up to age 49. If you are age 50 older, the cap is $8,000.
  7. Roth IRA Ceilings: Contributions phase out with Adjusted Gross Income (AGI) of $230,000 to $240,000 for couples and $146,000 to $161,000 for singles.
  8. IRA Deduction Phaseouts: Couples covered by 401(k)s begin to lose a portion of the tax deduction benefit at $123,000 of AGI and lose it completely at $143,000. For singles, the range is $77,000 – $87,000. If only one spouse is covered by a plan, the phaseout range for deducting pay-ins for the uncovered spouse is $230,000 – $240,000.
  9. QCDs:The Qualified Charitable Distribution cap is indexed to inflation, so IRA owners 70 1/2 and older can transfer up to $105,000 in 2024 from their IRAs directly to charity without having to pay tax on the withdrawal.
  10. 529s: Funds in 529 education accounts can be rolled over tax-free to a Roth IRA. There is a $35,000 lifetime cap and the 529 must be open for more than 15 years.

The Catch on Catch-Ups: 401k Update

SECURE 2.0 was a package of legislation signed into law in December 2022 as a follow-up to the Setting Every Community Up for Retirement Enhancement Act of 2019 (aka SECURE 1.0).

There has been some confusion since the passage of SECURE 2.0 regarding the new treatment of 401(k) contributions for older workers.

Upon passage of the legislation, it was assumed that beginning in 2024, employees who are 50 and older, and whose annual pay exceeds $145,000, would need to make catch up contributions only to a post-tax Roth 401(k). Currently, the maximum allowable 401(k) contribution from employees is $22,500, and the catch up is $7,500, for a total of $30,000 for employees 50 years and older.

The administrative aspects of this impending change caused concern by the administrators of 401(k) plans. The IRS recently provided guidance to clear up the ambiguity. Now, the IRS Is giving two years of administrative relief so payroll providers and others have extra time to implement the change.

For employees who are 50 and older, if your income exceeds $145,000, you can continue to make your catch-up contributions into a pre-tax (traditional) 401(k) account in 2024 and 2025.

Starting in 2026, catch-up contributions for 401(k) plans will need to be made after tax and directed to a Roth version of the 401(k).


Medicare Update: Enrollment Is Open

Medicare open enrollment period starts October 15 and continues through December 7 each year. During this period, Medicare enrollees can make certain changes in their coverage. Here is what we know about Medicare costs for 2024.

Everyone who has Medicare coverage (Traditional Medicare or Medicare Advantage) gets Medicare Part A free, but pays for Medicare Part B.

The Centers for Medicare & Medicaid Services (CMS) hasn’t said yet how much the base cost of Part B will cost in 2024, but the annual Medicare Trustees report in March forecast the monthly price to rise from $164.90 to $174.80, a 6% increase, in 2024.

Here are a few things to keep in mind:

If you are on Traditional Medicare and plan to stay on Traditional Medicare:

You may be able to lower your annual drug costs by switching to a different Plan D. For example. there are 24 Part D drug plans in Massachusetts, and each has a different premium, deductible, co-pay, and formulary (list of covered drugs).’

To compare plans, go to the site and set up your account. In the “What do you want to do?” section, select “Open all options”, then “Find health & drug plans.”

 If you want to switch from Medicare Advantage to Traditional Medicare:

Some people switch from Medicare Advantage to Traditional Medicare because they don’t like the restricted network of an Advantage plan, or because frequent copays for services have become expensive.

You can switch from a Medicare Advantage plan to traditional Medicare during the Medicare Open Enrollment period, or during the Medicare Advantage Open Enrollment Period (January 1 to March 31).

If you make this change and you want drug coverage, be sure to sign up for a Medicare stand-alone prescription drug plan (Plan D), unless you have creditable drug coverage from another source. If you do not, and you decide to sign up for Part D coverage later, you may face a penalty for late enrollment.

And if you want a Medicare Supplement Plan (or Medigap Plan, which covers most out of pocket costs) you’ll need to sign up for that then, too.

In most states, Medigap insurers are not required to sell you a policy if you don’t meet the medical underwriting requirements. If you are able to enroll outside of your open enrollment period, you might have to pay higher premiums.

MA residents note, though: You can join Medicare Supplement plans without the need for medical underwriting at any time of the year in Massachusetts, and you cannot be denied coverage nor be charged more due to your age or health status.

 Will I have to pay more for Medicare because of my income?

Some people pay more for Medicare Part B and Part D based on income. This additional payment is called IRMAA (Income-Related Monthly Adjustment Amount).

Your tax return for 2022 will be used to determine whether you will be subject to an IRMAA charge for 2024. If you retired in or after 2022, or had another life-changing event (e.g., marriage, divorce, death of spouse, etc.) you can file form SSA-44 to request that your IRMAA amount be reduced or eliminated.

IRMAA charges have not been released yet for 2024, but are expected to be about 6% higher than in 2023.

If you have questions or would like help evaluating your Medicare options, please let us know.



How to Respond to a Personal Data Breach

October is National Cybersecurity Awareness Month. In the spirit of promoting greater awareness of how to protect your data (see Personal Data Defense article from September), below are some tips on what to do if you are hacked.

  • Confirm the Breach: verify whether your personally identifiable information (PII) has indeed been compromised; check for unusual account activity, notifications from financial institutions, or alerts from the compromised service or organization.
  • Change Passwords: if the breach involves an online account, change the password immediately; use a strong, unique password for each account, and enable multi-factor authentication (MFA) where available.
  • Contact Affected Institutions: if your financial accounts or credit cards are involved, contact your bank or credit card company to report the incident; they can help you monitor your accounts for unauthorized transactions.
  • Credit Freeze / Alerts: consider placing a credit freeze on your credit reports with the major credit bureaus (Equifax, Experian, and TransUnion); this restricts access to your credit report, making it more challenging for identity thieves to open new accounts in your name. Alternately, you can place a fraud alert on your credit reports, which requires creditors to take extra steps to verify your identity before granting credit.
  • Monitor Your Accounts: continuously monitor your bank, credit card, and other financial statements for unusual or unauthorized transactions. Review your credit reports regularly to check for fraudulent accounts or activity.
  • File a Police Report: if you believe your identity has been stolen, file a police report; this documentation may be required by banks, creditors, or other organizations to prove that you’re a victim of identity theft.
  • Report to Government Agencies: contact the Federal Trade Commission at gov to report the identity theft or data breech; they provide resources and guidance for victims.
  • Notify Creditors and Utility Companies: inform your creditors and utility companies about the situation; they can help you investigate and resolve fraudulent accounts or charges.
  • Update Online Accounts: review your online accounts, including email and social media, for any signs of unauthorized access; change passwords and enable MFA where possible.
  • Document Everything: keep a detailed record of all communications and actions taken regarding the breach; this documentation may be necessary for resolving any issues that arise later.

If you’ve managed to avoid being hacked, that’s certainly a good thing! But knowing what to do if your data security is breached can save you time, aggravation, and money.





How to Play Digital Defense and Protect Your Personal Information

US Consumers lost $8.8 billion to financial fraud last year, up 44% from 2021, according to a recent Bloomberg News article. And cybercrime costs worldwide are set to grow to $19.5 trillion by 2025.

The Federal Trade Commission notes hundreds of thousands of cases where individuals have reported losing at least $1,000, as the chart below shows.

Many of us have been affected by cyber crime, either directly or indirectly by way of a relative or friend. Knowing what steps to take to create a more secure digital environment can give you greater peace of mind and hopefully allow you to avoid being scammed.

Here’s our Top Ten List for Playing Digital Defense and Protecting Your Personal Data:

  1. Use Strong, Unique Passwords: use a different password for each online account and consider using a reputable password manager to generate and store your passwords securely.
  2. Enable Multi-Factor Authentication (MFA): this adds an extra layer of security by requiring you to provide a second form of verification (e.g. a text message code) in addition to your password.
  3. Regularly Update Software and Apps: this helps to keep your computer and phone operating systems, software applications, and antivirus programs up to date.
  4. Use Secure Connections: ensure websites you visit have a secure connection (look for “https:// and a padlock icon in the address bar).
  5. Be Cautious with Emails and Links: verify the sender’s authenticity before clicking on links or downloading attachments, and don’t provide sensitive information through email unless your email is encrypted.
  6. Limit Your Data Sharing: be mindful of information you share on social media platforms and adjust your privacy settings to limit who can see your personal information.
  7. Monitor Your Financial Statements: regularly review your bank and credit card statements for unauthorized transactions and report suspicious activity immediately.
  8. Regularly Check Your Credit Reports: request free annual credit reports from each of the three major credit bureaus (Equifax, Experian, and Transunion).
  9. Freeze Your Credit: consider freezing your credit with the credit bureaus; this makes it more difficult for identity thieves to open new accounts in your name.
  10. Consider Using a Virtual Private Network (VPN): this provides an extra layer of protection when you access information through publicly available sources; using a VPN (provided by a vendor) makes it harder for observers to identify you and track your online movements.

Conducting an annual personal cyber safety audit is a worthwhile endeavor. It will help you determine if you’re at risk of having your identity stolen or becoming a victim of fraud. Here’s a checklist that will help you conduct your personal audit and improve the way you play digital defense.

Heir Drama: Inherited IRA Update

For high drama, summer is high season for moviegoers, thanks to Hollywood blockbuster film releases. Those with Inherited Retirement Accounts have been experiencing heir drama since 2020 thanks to Congress and the IRS – and the spectacle continues.

Congress passed the Secure Act in 2019 which changed many of the long-standing rules governing IRAs and other retirement accounts.

One of the more impactful changes was to the post-death distribution rules for retirement accounts held by “Non-Eligible Designated Beneficiaries” (essentially beneficiaries who are not surviving spouses).

The new rules applied to IRAs whose original owner died after January 1, 2020 did away with favorable tax treatment called the “Stretch IRA” for most Non-Eligible Designated Beneficiaries.

According to the new rules, rather than being able to take IRA distributions based on their own life expectancy, Non-Eligible Designated Beneficiaries were required to empty their inherited accounts within ten years of the death of the original owner.

The drama results from the interpretation of the requirements for timing of the distributions for Non-Eligible Designated Beneficiaries. The wording of the Secure Act was somewhat vague and therefore caused confusion about how heirs needed to take distributions.

Many observers expected that Non-Eligible Designated Beneficiaries would not be required to take annual distributions during this 10-year period as long as the account was fully distributed by the end of the 10th year.

In February 2022, the IRS issued Proposed Regulations that would make a subset of these beneficiaries (those who inherit accounts from decedents who died on or after the date whereby they were required to begin taking distributions) subject to both the 10-Year Rule and annual Required Minimum Distributions (RMDs).

The source of the drama was that these were merely proposed regulations, so beneficiaries remained in limbo regarding whether they would need to take distributions in 2022 (or should have taken them in 2021) to avoid potential tax penalties.

Then in October 2022 the IRS issued a notice waiving any potential penalties for Non-Eligible Designated Beneficiaries for 2021 and 2022 for missing RMDs from their inherited retirement accounts, which effectively eliminated RMDs for those years.

The tax saga continued to play out, because the IRS remained silent about the requirements for 2023 and onward.

Heirs who’ve been enjoying the tax-related theatrics were treated to a new release from the IRS in July 2023. Notice 2023-54 eliminates penalties for Non-Eligible Designated Beneficiaries for failing to take RMDs for 2023 and pushes forward RMDs yet again until at least 2024.

But the drama rolls on, because the IRS has yet to provide information as to when final regulations might be expected that could clarify RMD requirements for future years.

From a tax planning perspective, although Non-Eligible Designated Beneficiaries do not have to take distributions from their inherited accounts, they can still make voluntary distributions.

If you fall into the category of Non-Eligible Designated Beneficiary, you may want to consider the impact to your income tax situation over time by delaying distributions. Holding off could mean future spikes in taxable income, and ultimately paying more in tax over time.

If you have questions, Susan and I can help you look more closely at your tax situation. We can recommend tax-related strategies, including retirement account distribution strategies, with the goal of reducing the amount of tax you’ll pay over the long term.

If you’re an existing client, we encourage you to send us a copy of your 2022 tax return so we can review it and help minimize any potential drama related to your future tax situation.

Have a Social Security COLA and a Smile

Social Security recipients could get a 3.1% increase next year in their benefit, compared to the 8.7% Cost of Living Adjustment received in 2023.

The Social Security Administration will announce the actual cost of living adjustment for 2024 in October.

To arrive at the figure, SSA will compare the average consumer-price index from the third quarter of 2023 with the average data from the same period last year.

The Senior Citizens League, a nonprofit organization, estimated the underlying data that goes into the calculation to arrive at 3.1% and will update its projection monthly until the actual adjustment is announced in the fall.

In its May press release, the Senior Citizens League posted some interesting statistics on inflation, specifically regarding the fastest growing costs for older Americans.

The note highlights that between January 2000 and February 2023, Social Security COLAs increased benefits by 78%, averaging 3.4% annually, while the cost of goods and services purchased by typical retirees rose by 141%, averaging about 6.2% annually over the same period.

For many retirees, Social Security income is significant, but only part of their total income picture.

However, this information highlights the pernicious effect of inflation, the need to keep an eye on recurring expenses, and the importance of a long-term financial plan that takes into account the effects of rising costs over time.

Time to Schedule a Tax Review

Susan and I have been working with a planning tool that helps us review your tax situation and spot opportunities for tax savings. The technology is terrific and requires a scanned version of your most recent tax return to start the process.

For this month’s Planning Point, we have a request: please upload a copy of your 2022 tax return to one of our secure file sharing systemsShareFile or Advyzon.

After we receive your 2022 tax return, we will reach out to you to schedule some time for a tax review. Thank you in advance for providing your information!

Social Security Situation: Preparing for Potential Benefit Changes

Social Security has been around since 1935 and was designed as a contributory system where workers pay into a fund that will provide benefits when they retire.

The program has two parts: Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI), each supported by a Trust Fund and overseen by a Board of Trustees.

The Social Security Act requires that the Trustees report annually to Congress on the actuarial status and financial operations of OASI and DI Trust Funds. The latest report was released on March 31, 2023.

Issues regarding the long-term health of Social Security have been raised by the Trustees responsible for the Social Security system.

Having some perspective on the current state of the fund, and its future solvency, is important for retirees who receive benefits, and for those who expect to rely on benefits in the future.

At the end of 2022, OASI and DI were providing benefits to about 66 million people, and during the year, an estimated 181 million people had earnings covered by Social Security and paid payroll taxes on those earnings.

The total cost of the program in 2022 was $1.244 trillion, and total income was $1.222 trillion. Income comes from two sources: non-interest income (contributions from workers) which was about 95% of total income, and interest earned on investments, which accounts for the remaining 5%.

Under the Trustees’ current assumptions, Social Security’s total cost is projected to be higher than its total income in 2023 and all later years. Total cost first exceeded total income in 2021.

From an actuarial standpoint, the Social Security program remains solvent for the next ten years. The chart below from the Social Security Administration shows the projected Trust Fund balance through 2033.

The problem is that, unless changes to the system are made soon, the Trust fund reserves will be depleted by 2034 and collections from workers will not be enough to maintain the benefits of recipients.

The reason for the impending depletion is demographics: the retirement of Baby Boomers is increasing the number of beneficiaries faster than the increase in the number of workers paying into the system.

To put the Trust fund and the system on a path of long-term sustainability (which the actuaries define as the next 75 years), the Trustees suggest the following:

  1. Revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax increase of 3.44 percentage points, to 15.84%;
  2. Or scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of 21.3% applied to all current and future beneficiaries
  3. Or scheduled benefits would have to be reduced by 25.4% if applied only to those who become eligible for benefits in 2023 or later
  4. Or some combination of the above

The Trustees conclude with a call to action for lawmakers to address the projected Trust fund shortfalls in a timely way so that necessary changes can be phased in gradually to give workers and beneficiaries time to adjust to the changes.

The Trustees’ sentiment of giving workers and retirees time to prepare and adjust to impending changes is prudent.

Demographics are unlikely to change quickly, and the action that Congress decides to take (or not take) is unknowable. The proverbial “can” could be kicked down the road by politicians for several years until the problems become more acute.

One way to prepare for potential future changes to Social Security benefits is to ‘stress test’ your financial plan. Our MoneyGuide financial planning software allows us to do this. The Social Security module in the software facilitates testing for a range of benefits reductions and helps you see how this affects the long-term results of your financial plan.

Susan and I recognize that contemplating negative impacts to your financial plan can cause discomfort. We’re able to model different Social Security outcomes and work with you to think through financial planning options.

 Visualizing a range of outcomes and having a plan for adjusting to different circumstances prior to any change in Social Security may ease anxiety and help you look more confidently toward the next decade and beyond.





The Taxman Cometh – Getting Ready to File Your Return

The IRS set January 23 as the official start to the 2023 tax filing season. Many of us are now busy gathering tax-related documents for tax preparation purposes. The filing deadline to submit 2022 tax returns or to submit an extension to file is Tuesday, April 18.

Even if you go on extension until October 16, you still have to pay any tax you expect to owe by April 18 or the IRS will add penalty and interest charges to the amount owed.

The IRS provides a useful reference page on their website, which includes ‘Tips to Help People with the 2023 Tax Season’ at

Also, you might find this two-page reference sheet of important tax-related numbers for 2023 helpful. The data includes: 

  • Federal Income Tax Brackets
  • Capital Gains Rates
  • Medicare Premiums
  • IRMAA Surcharges
  • Retirement Plan Contribution Limits

Susan and I will also gladly address your tax planning questions.

Here’s wishing you many happy returns!