This year, retirees and other investors have some things they can add to their gratitude list.
If you have money in the market, you’re retired or you’re saving for retirement, several positive developments, including a resilient market performance and changes to retirement withdrawal rules, may be affecting your wallet in a good way.
Here’s what retirees and savers can be thankful for in the world of retirement savings.
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Account Values Typically Increased This Year
As of mid-November, the S&P 500 was up about 18% year to date. That’s welcome news for investors whose accounts were battered in 2022, as the index posted a decline of 19.5%.
While there’s still plenty of economic uncertainty, and interest rates remain high, the positive year-to-date performance reflects overall market strength heading into the end of the year.
Despite the broad increase, investors who hold single stocks or funds tracking beaten-down industries, such as regional banks, may find opportunities for tax-loss harvesting. That process involves selling investments at a loss to offset capital gains and minimize taxes on investment returns.
Changes to Required Minimum Distributions From Retirement Accounts
“Beginning in 2023, the age to take a required minimum distribution from your retirement accounts was pushed back to 73 years of age,” says Kelly Regan, a certified financial planner at Girard Advisory Services in King of Prussia, Pennsylvania.
“This helps delay income payments to reduce your taxable income and allows for longer tax-free growth in the retirement account,” she adds.
The changes are part of the SECURE 2.0 Act that President Joe Biden signed into law in December 2022. The SECURE Act of 2019 boosted the RMD age from 70 1/2 to 72. SECURE 2.0 increased the age to 73, and in 2033, that age increases to 75.
[READ: 8 Great Hobbies in Retirement.]
A 3.2% Social Security Cost of Living Adjustment
In October, the Social Security Administration said Social Security recipients would receive a 3.2% cost of living increase, or COLA, in their benefits in 2024. That’s less than the 8.7% cost of living adjustment in 2023, reflecting a slower pace of inflation in the past year.
The 3.2% COLA becomes effective starting with payments going out on Dec. 29, 2023. The Social Security Administration said the average recipient would receive about $50 more per month, although AARP estimated the average increase at $59.
In a statement announcing the change, Kilolo Kijakazi, acting commissioner of the Social Security Administration, said, “This will help millions of people keep up with expenses.”
Increases in Employer-Sponsored Retirement Savings Limits
The IRS recently announced a limit increase for 401(k) contributions. In 2024, that amount goes up to $23,000 from $22,500. Workers ages 50 or older may invest an additional $7,500 as a catch-up contribution, for a total of $30,500. Depending on how your plan is structured, you may be eligible to make after-tax contributions beyond the pretax and Roth contribution limits.
Your total contribution cannot be greater than your annual compensation from the employer that sponsors your plan.
Those new limits also apply to other types of employer-sponsored qualified accounts, such as 403(b) and most 457 plans, Regan says.
Increase in Individual Retirement Account Limits
For individual retirement accounts, the annual contribution limit increases from $6,500 to $7,000 in 2024. The catch-up contribution amount for IRAs remains $1,000 for those over 50 years of age.
Those IRA contribution limits reflect the maximum you may contribute annually across both traditional and Roth IRAs. If you have a traditional IRA as well as a Roth, you may not contribute more than this amount across both accounts in a single year.
[Related:How to Retire on $100,000]
Higher Savings Account Interest Rates
In the rising interest rate environment, many banks are offering savings accounts with rates of around 4% to 5%. “This is the highest we’ve seen in years, so talk to your advisor and take advantage of earning more income on the cash you’re sitting on,” Regan says.
Higher rates also mean greater returns from annuities, bonds, Treasurys and certificates of deposit, says Jason Matthews, president and CEO of Matthews Financial & Insurance Solutions in Oakland, California. “Investors can be thankful now that they don’t need to take on so much risk to generate the income they need for retirement,” he says.
Senior Discounts
Interest in senior discounts surged along with inflation as people focused on ways to stretch every dollar from fixed incomes. The declining stock market also spurred interest.
Museums, restaurants, stores and many other places offer discounts for seniors, although the age of eligibility can vary.
Carla Adams, founder and financial advisor at Ametrine Wealth in Lake Orion, Michigan, suggests keeping an eye out for discounts and early bird specials.
“There are so many great senior discounts out there, particularly entertainment venues like movies, museums and zoos, to take advantage of,” Adams says.
She suggests joining AARP to qualify for even more ways to save money
She notes that retirees have an advantage when it comes to certain discounts. “Even though anyone can take advantage of early bird specials at restaurants, those who are still working may not be able to get there on time,” she says.
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7 Things Retirees Should Be Thankful for This Year originally appeared on usnews.com
