2024 Sneak Peak

How long can I still light my Christmas candles? I don’t know if it's more weird to have a closet full of half burnt Yankee Candles or to have a house that smells like Christmas until August.

Sadly, I don’t have a crystal ball. I don’t know if the Fed will cut rates or who will win the 2024 election. I don’t know what companies will skyrocket like NVIDIA or crash like Blackberry when the iPhone was released.

However, your favorite government agency, the IRS, has an announcement that is actually good! So here are a few of the updates that you need to know to optimize your retirement planning:

Retirement Account Limits

IRA: 

The new limit for IRAs is $7,000, up from $6,500. An additional $500 every year may not seem like a lot, but over a 30 year growth period, it can add over $100,000 to your IRA account. If you’re 50 or older, you can contribute an extra $1,000 (for $8,000 total).

If you are a single filer with a Roth IRA, you can contribute the full $7,000 if your income is below $146,000. After that, your contribution limit decreases. At $161,000 of income, you cannot contribute directly to a Roth IRA. This is an increase from $138,000 & $153,000.

If you are married filing jointly, you can contribute the full $7,000 if your combined income is below $230,000. After that, your contribution limit decreases. At $240,000 of income, you cannot contribute directly to a Roth IRA. This is an increase from $218,000 & $228,000. There are legal (and ethical) ways to get around these income limits, which we’ll dive into in a future letter.

If you are married filing separately, the IRS hates you. If you make more than $10,000, you cannot contribute to a Roth IRA at all. 

For Traditional IRAs, the rules are much more complicated for when you can and cannot deduct your IRA contributions. The IRS does a good job of explaining all the specifics here. There are many exceptions based on if you or your spouse have retirement plans through work. Check out this newsletter if you want to learn more about Roth and Traditional IRAs.

BONUS GIFT! Because we love you, click here for exclusive access to a flow chart from Mike’s book with some advice on where to invest your money based on your tax filing status, income, and retirement goals.

401(k), 403(b), 457, and TSP:

For all these plans, your maximum contribution increases from $22,500 to $23,000 (not including employer matching), plus an extra $7,500 if you’re 50 or older. Unlike the IRA, you should not max out these accounts as fast as possible if you receive employer matching. If you hit $23,000 before December, then your employer matching also stops and you won’t be getting all the money you deserve! 

Standard Deduction Limits:

For your 2024 taxes, the standard deduction for a married couple filing jointly is $29,200. Which is an increase from $27,700 for your 2023 taxes. This means your income up to the standard deduction is tax free. 

There is no change to the unlimited deductions for itemized deductions which was changed by the Tax Cuts and Jobs Act. 

You can find the full list of tax changes for 2024 here.

How out of touch is the IRS with the American people you ask? On the above webpage for 2024 tax changes the first item they talk about is “the Hazardous Substance Superfund financing rate for crude oil received at U.S. refineries.” I don’t think that applies to many people… but it’s the first thing they talk about. Classic. 

Now let’s talk about some of the big events:

The 2024 Federal Election

How will the election affect the markets? Historically speaking, elections don’t have big impacts on the markets in the mid and long term. Which is good news for the ETF and Chill crowd. U.S. Bank did a great analysis on the historical impacts elections have on the market. The bottom line is that most outcomes of the election have no statistically significant impact on the markets. If a Republican wins the White House and Democrats win Congress, the markets perform worse. If a Democrat wins the White House and Republicans win Congress or Congress is divided, the markets perform better! The difference in performance though is minimal between .99% and 1.75%. Which means don’t change your investment plans due to the election!

Government Shutdown 

In 2023, Congress passed funding bills to keep the government funded until 19 January and 2 February. Debates over border control and immigration reform are preventing additional funding bills from passing. Don’t worry! Morgan Stanely published an analysis of government shutdowns on the stock market last year. The bottom line, similar to elections, is a shutdown historically has not affected the stock market negatively.

Federal Reserve Rate Cuts

After the most recent Federal Reserve meeting, officials now estimate up to three rate cuts in 2024 starting as early as March. However, these projections change drastically every time new data comes out. From inflation to jobs reports, there are many economic indicators that influence this decision. I continue to be extremely hesitant to believe the Fed will cut rates until inflation is at or below 2.5% for three months.

Life is about much more than just stock market performance! No matter what happens in politics or the stock market in 2024, I hope you have a fantastic year. Plan for retirement, plan for emergencies, invest often, but don’t let that distract you from enjoying life now and having fun. The best plans allow you to enjoy life now and in 20, 30, and 40 years.

In addition to our normal letter, Mike and I will be in your inbox the first Thursday of every month to talk about the markets and current events. It will probably be a busy year for the Monthly Market Debriefs… 

Call to Action

It’s never too early to start preparing your 2023 taxes! A good place to start is by calculating if you should take the Standard Deduction or Itemize. Depending on how much you can write off, you may save more money by taking the standard deduction.

What We’re Reading/Listening To:

Right now, Jules and I are watching “Squid Game: The Challenge” a Squid Game based reality show on Netflix. This isn’t in any way educational (shocking, I know). We consider ourselves connoisseurs of reality tv, and this one is getting better and better. If you watched the actual show or not, this is entertaining TV.

Debrief on Deck

Next Week, Mike is going to dive back into retirement questions with ‘How Soon can I Retire?’ Jules and I have already picked out a house in The Villages in Florida. With 55 golf courses, golf cart only parking lots, 4PM early bird specials, and nightly bingo, we can’t get there soon enough.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on social media (X (formerly Twitter) and Instagram).

Until then, stay the course.

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