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Will Your Birthday Impact Your Finances This Year?

Many IRS rules are directly related to age. Most of your tax deductions, credits, and penalties are based on how old you, your spouse, and your dependents will be at the end of this year. These ages also affect eligibility for health insurance, Social Security and Medicare benefits, and tax-efficient opportunities like making charitable gifts from your IRA.


For example, you may know that once you reach age 50, you can contribute an extra $1,000 a year to an IRA or Roth IRA and an extra $7,500 to most employer retirement plans like 401(k)s. These are called catch-up contributions. It might stand to reason that if you have a health savings account, you would be eligible for a catch-up contribution to that account at age 50 as well, but alas, complexity abounds and the extra $1,000 per spouse that can be made to HSAs doesn't kick in until age 55.


Given the ever-changing laws and inconsistent age thresholds, you may find it helpful to refer to this chart. It shows each of the major age-related milestones for 2024 and how they could affect you.



2024 Age-Related Financial Milestones

Keep in mind that some of these milestones have date-specific rules. For instance, eligibility to make a qualified charitable distribution (QCD) from your IRA does not occur in the year you turn 70 and a half. Instead, you become eligible to make a QCD the day after you turn 70 and a half.


If you have reached the year of your first required minimum distribution (RMD), note that for one year only, you have an option other folks don't have. Typically, if an RMD is required, it must be taken out by December 31st of the calendar year to avoid penalties. In your first year of RMDs, you can choose to take the distribution during the calendar year or wait until April 1st of the following year. If you opt for the latter option, you will take two IRA distributions in one year; both the RMD you delayed from this year and the RMD for next year. They will each be reported on next year's tax return.


While I certainly hope the IRS isn't your first thought when you wake up a year older, being aware of how your birthday will impact your finances for the year can help you plan accordingly and avoid surprises.


Thanks for reading and I wish you a great start to 2024!




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