Many people aim to retire in the near future. Hopefully, everything will go smoothly. However, retirement plans are always confronted with challenges, whether it is market volatility, healthcare affordability, or inflationary risks. On top of that, you’ll have less financial flexibility without a fixed income.
Do not be alarmed, future retirees. In 2024, you can expect to see some exciting new trends that can help you not only reach your retirement goals but make your wallet fatter by $1000 per month as well.
The Relocation Shuffle
The importance of location in 2024 goes beyond scenic views. Instead, it’s about maximizing your financial resources. So, look for states with low taxes, affordable healthcare, and vibrant retiree communities.
As of 2022, Florida, North Carolina, Michigan, Arizona, and Georgia remain the top states to relocate to for retirees, according to The Motley Fool. Several factors may be driving seniors to look for cheaper places to live, including higher inflation and lower living costs.
As SmartAsset reported recently, Florida is home to the nation’s largest population of people aged 60 and older. Due to its warm climate and lack of state income taxes, the Sunshine State attracts thousands of seniors each year from other states. In 2021, 54% of those moving into the state were over 60, while 46% were 70 and older.
As a result of the net migration of people 60 and older, four Sun Belt states – Arizona, South Carolina, North Carolina, and Tennessee – ranked next. According to census data, Arizona received 25,090 net inflows in 2021 and South Carolina received 19,004. During the same period, North Carolina and Tennessee recorded net migrations of 18,996 and 14,767, respectively.
According to Choice Mutual, Iowa will be the best state to retire in 2024. There are lower crime rates for seniors in Iowa, as well as a good medical care system.
Choice Mutual also found:
- Overall, Florida is the safest state for retirees, followed by Wyoming.
- With good scores for cost and access to quality health care, Rhode Island is the best state for retiree health care.
- Due to its low cost of living and great tax benefits for seniors, Mississippi is the most affordable state for retirees.
By choosing the right location, you can save thousands of dollars on taxes, healthcare, and overall living expenses.
The Getaway Grab: Embrace Adventure (and Lower Costs!)
Rather than Florida retirement communities, 2024 is the year the adventurous retiree enters retirement.
In recent years, studies have shown that older travelers are becoming more adventurous and interested in adventure tourism in order to experience something they find personally fulfilling.
Further, many travel tours cater to senior travelers, with hiking and biking trips suited to a variety of physical abilities across the world.
Imagine yourself exploring vibrant coastal towns in Portugal, trekking through rainforests in Costa Rica, or soaking up Moroccan culture. Not only do these destinations offer breathtaking beauty and unique experiences, but they also offer a significantly lower cost of living than the U.S.
Portugal, for instance, has a 38% lower cost of living than the U.S. Additionally, it costs 44.4% less to rent in Portugal compared to the U.S.
It is, however, recommended that you research the available visa options, healthcare access, and local economy in the country you are considering moving to before retiring aborad. A good place to start is joining a travel group or an online community for retirees who are seeking adventure overseas.
The Downsize Domino: Right-Size Your Living, Right-Size Your Expenses
McMansions are a thing of the past. People of all ages, not just retirees, are seeking smaller, more manageable living spaces, often in walkable neighborhoods, in 2024.
According to the National Association of Home Builders, new single-family homes are currently smaller than existing homes with a median square footage of 2,261 feet and a mean square footage of 2,469 feet.
Obviously, this reduces your monthly housing costs. In addition, you get the opportunity to simplify your life, increase your sense of community, and have more time for things you enjoy. Since the average mortgage payment is $2,317, and the average rent for an apartment is $1,372, that’s an extra grand in your pocket.
Before you commit to buying, however, consider renting. Find a senior living community that fits your lifestyle and consider co-housing options. Also, you need to be ruthless when it comes to downsizing and embrace minimalism.
More Flexibility for 401(k) Savers
As a result of SECURE 2.0, several retirement plan provisions become effective in 2024. Specifically, companies will be able to match contributions to employee retirement plans if they are paying down student loans.
In other words, employee dollars go towards paying down debt, while employer dollars go into retirement plans. This type of match can be tax-deductible for employers thanks to SECURE 2.0. The employer is responsible for determining the specific match formula and whether or not they will match at all.
Additionally, SECURE 2.0 allows plans to offer assistance to employees during times of need. Employees can now save for unexpected expenses with a “sidecar fund” offered by plans. It would cap contributions at $2,500 or even lower, and the principal would be protected by investing in principal-protecting investments.
Alternatively, employees could withdraw up to $1,000 per year without being penalized for early withdrawals of 10%.
Depending on the plan, these features may not be included right away. Get in touch with your organization’s benefits person or team if these are of interest to you.
Ch-ch-ch-ch-Changes to Your Retirement Accounts
Are you sitting on unused funds in 529 education account? If so, you can roll those savings over tax-free to a Roth IRA starting in 2024.
Obviously, there are some restrictions. A Roth IRA has an annual contribution limit of $5,000, and there is a lifetime cap of $35,000 for rollovers. If you have $35,000 in unused 529 assets and are under 50, you can roll over $7,000 per year (this contribution limit may change annually). You must also have had the 529 account for at least 15 years.
When you reach age 73 or older, Roth accounts designated in a 401(k) or 403(b) plan are no longer subject to required minimum distributions.
RMDs can generally be delayed until your retirement year if you participate in an employer-sponsored retirement plan. When an individual dies, he or she does not have to withdraw money from a Roth IRA.
It’s Time For That Roth IRA Conversion
After 2025, federal income tax rates are expected to increase, so Roth IRA conversions may be advantageous. According to Sarah Brenner, director of retirement education at Ed Slott & Co., that allows you to lock in current rates.
Others agree. But, they suggest paying attention to your tax bracket over a long period. “Plan your taxes over several years, particularly with the changes scheduled to occur Jan. 1, 2026,” added Lisa Featherngill, a senior vice president and national director of wealth planning at Comerica Wealth Management.
“Determine if you will be in a lower bracket in 2024/2025 than 2026 and future. If so, consider a Roth conversion or partial Roth conversions in 2024 and 2025 to spread the tax payments,” Featherngill said.
How does this benefit you in terms of your retirement and tax planning? Growth in Roth IRA accounts will be tax-free. Also, after five years from the original conversion date, there will be no withdrawals.
You must wait five years before you can withdraw funds from a Roth IRA after converting to a traditional IRA or other retirement account. A Roth IRA is generally funded by after-tax dollars. Tax-free growth is possible in the account, and withdrawals are generally tax-free as well.
To maximize tax-free growth, Featherngill recommends starting early.
Converting your traditional IRA to a Roth IRA involves taking money out of your traditional IRA and depositing it into your Roth IRA. The distribution will be taxed at your ordinary income tax rate. Pay attention to whether the distribution will put you in a higher tax bracket, such as 24% to 32%, or 12% to 22%.
Contribute More to Your Retirement Plan
You can contribute up to $8,000 to an individual retirement account (IRA) if you are 50 or older in 2024. For older savers, that includes a $1,000 catch-up contribution. For people under 50, the cap is $7,000. Compared to 2023, both contribution limits have been increased by $500.
The reason? Under the SECURE 2.0 Act of 2022, the IRA catch-up limit is now tied to inflation.
You still have time to make contributions for the 2023 tax year. If not on your calendar yet, the deadline is April 15, 2024.
The contribution limits for workplace retirement plans have also been raised. Age 50-plus workers can contribute up to $30,500 to their 401(k), 403(b), most 457 plans, or Thrift Savings Plan, if they work for the federal government. Compared to 2023, that’s an increase of $500. The contribution limit for younger adults goes up from $22,500 to $23,000.
Those ages 60 to 63 will have a higher contribution cap starting in 2025.
The Silver Startup Surge: Unleash Your Inner Entrepreneur
The concept of retirement is no longer limited to rocking chairs and bingo nights. Instead, retirees are choosing to start their own businesses.
According to one survey, the majority of small business owners are Baby Boomers (39.63%) and Gen X (47.20%). Further, workers aged 65 and older had the highest rate of unincorporated self-employment (15.5%) of all age groups. In addition, nearly two-thirds of Americans will open a small business after they retire.
“People are living longer … and many are choosing to start a small business as a way to stay active,” said Luke Pittaway, professor of entrepreneurship at Ohio University. “In fact, the proportion of people starting businesses in the age range of 55 to 65 has increased in recent years and, at one point, even surpassed the typical entrepreneur age group of 25- to 35-year-olds.”
“Silver startups” will continue to grow in 2024, where retirees use their expertise and experience to launch their own businesses. The possibilities are endless, whether you want to work for yourself, freelance, or open a niche online store. In addition to generating income, this also keeps your mind sharp, fosters a sense of purpose, and connects you with like-minded people.
When it comes to retiring and starting a business, you need to determine your skills and passions. Take advantage of online resources and workshops designed specifically for senior entrepreneurs as well. And, engage in networking with other retirees who have launched successful businesses.
Gig Economy Gurus
If you want to earn money during retirement, you don’t just need to start your own business. In the gig economy, retirees are able to utilize their skills and experience while still enjoying flexible schedules and remote working possibilities. Whether you’d like to teach online courses or drive for Uber, the possibilities are endless.
In fact, an AARP study published in 2023, found that 26% of US adults aged 50 and older are gig workers.
The benefit of this is that even a few hours per week of gig work can make a significant difference to your retirement income. For instance, an additional $800 per month can be earned by working just 10 hours per week at $20 per hour.
The Sharing Economy Boom
2024 is all about sharing. In fact, 72% of Americans have used a shared service or app, 50% have purchased used goods online, and 15% have used a ride-hailing app. It is also expected that by 2027, the value of the sharing economy will reach $600 billion.
For example, rent out your spare room on Airbnb, join a community garden, or share a car with neighbors to reduce expenses like food and transportation. By cutting expenses and providing alternative income streams, the sharing economy frees up funds for more leisurely pursuits.
Imagine this. Your spare room could earn you $500/month, and you’d save $100/month on car expenses – that’s already $600 towards your goal!
Technology Will Make Retirement Easier
Don’t hold on to the flip phone any longer. It’s time to embrace the tech revolution! Technology can help you retire smarter and cheaper in 2024 in the following ways:
- Budgeting apps like Mint or YNAB can help you keep track of your spending and identify areas for reductions.
- Save money on financial advisor fees by using robo-advisors to manage your investments.
- Reduce your energy bills by investing in smart home devices.
- Consider telehealth as a cost-effective healthcare option.
- To save on gas and impulse purchases, consider online grocery delivery.
- Rather than clipping coupons, use digital coupons.
By taking these tech-savvy steps, you’ll be able to save more money each month, bringing you closer to your $1,000 goal.
Emerging Innovations and Trends in Retirement Planning
The retirement landscape in 2024 will be shaped by the personalization of retirement, according to T. Rowe Price’s most recent report.
“Targeted experiences can drive behavioral change and improve retirement outcomes,” states the report.
T. Rowe Price anticipates that the use of data analysis, technology, and integrated experiences to engage diverse audiences will lead to improved retirement outcomes.
Based on its findings, T. Rowe Price said, “Consumers are increasingly looking for personalization in all aspects of their lives. The retirement experience is no different.”
An investor’s likelihood of sticking to their retirement plan can be improved by tailored and targeted experiences, according to data from the company’s workplace retirement plans.
To put it another way, the one-size-fits-all won’t be as effective as it used to be. Report findings, for instance, showed that personalized educational videos and native language portals, such as those in Spanish, lead to better financial decisions.
What are the biggest challenges facing retirees today?
Retirement challenges today are complex, with varying degrees of impact on retirees. A few of the most notable ones are listed below:
- Outliving their savings. For many retirees, this is their top concern. It can be challenging to ensure that their nest egg lasts throughout retirement due to rising life expectancy, volatile markets, and uncertain economic conditions.
- Insufficient income. Most people have been unable to save enough for retirement, resulting in tight budgets or even financial hardships in retirement.
- Medical expenses. A retiree’s healthcare and medical expenses are among his or her biggest expenses. With age, most chronic illnesses become more prevalent.
- Inflation. As a result of inflation, the dollar’s purchasing power decreases over time. Keep up with inflation by considering investment returns.
- Market fluctuations. It can be more difficult to manage assets in retirement than it was when you were younger. Time doesn’t allow you to overcome temporary market fluctuations.
- Retiring too early. Those who retire too young could be forced to “pay for the rest of their lives”.
- Unexpected costs. In retirement, unexpected costs can threaten the financial well-being of the retiree.
How can I plan for a comfortable retirement even with limited savings?
The possibility of a comfortable retirement is within reach even if you have limited savings. Here’s how:
- Start now. The most valuable resource you have is time. Make small investments, like $25 per week, to grow with interest.
- Maximize the employer match. Don’t miss out on the full match offered by your employer’s retirement plan.
- Budget ruthlessly. Track expenses, find leaks, and eliminate non-essentials. A dollar saved is a dollar set aside for retirement.
- Explore alternative savings. You may want to consider IRAs for tax benefits or downsizing to save money on housing.
- Boost your income. Consider upskilling, side hustling, or delaying retirement for a few years. The little things add up.
- Plan for a lower-cost lifestyle. If possible, relocate or modify your travel/hobbies to areas that are more affordable.
- Prioritize your health. Long-term savings are possible with preventive care.
- Embrace flexibility. As life changes, adapt your plans accordingly.
- Seek free financial guidance. Use online resources, libraries, or community centers to assist with budgeting and planning.
Keep in mind that consistency is key. It is possible to create a comfortable future with small, consistent efforts now.
What are the best ways to stay engaged and active in retirement?
Retirement isn’t a destination, it’s an adventure! Keeping your passions alive will keep you vibrant:
- Explore new hobbies or rekindle old ones.
- By taking classes or learning a language, you can challenge your mind.
- Socialize with others. Consider joining clubs, volunteering, traveling, and building a social network for support and laughter.
- Move your body to feel invigorated by walking, hiking, swimming, and dancing.
- You can make a difference by giving back your skills and time.
- No matter where you go, you can travel. Discover new cultures, rekindle old relationships, and make lifelong memories.
Retirement is a unique experience for everyone. Make every day an adventure by blending these ideas and discovering what sets your spirit ablaze. There is even the possibility of monetizing these activities!
How can technology help me manage my finances and health in retirement?
You can use technology to your advantage in retirement.
Budgeting apps, for instance, make it easier to keep track of spending, automate bill payments, and automate budgeting. Apps like Mint and You Need A Budget (YNAB) help you keep track of your budget, while investment platforms make it easy to buy and monitor investments. Looking for more? A robo-advisor offers automated investment based on your goals, and a secure communication tool makes it easier to work with a financial advisor remotely.
Providing early warnings and data for health improvement, wearable devices monitor vital signs, sleeping patterns, and activity levels. The use of telemedicine apps allows for remote doctor consultations, which saves time and travel expenses. Personalized workouts and progress tracking are available in fitness apps, motivating you to stay active. In addition, online communities enable you to connect with peers and share social experiences with them.