Year-end decisions for retirement funds

Some retirement plan choices you can make at the end of the year can potentially reduce your taxes or increase your retirement funds.

Calculate your retirement investment fees

You should find in your mailbox a participant fee disclosure statement. Before you drop it into the junk mail pile, you will want to read the information inside. Among the items listed will be the expense ratio for each $1,000 you have invested in the 401(k), 403(b) or 457 plan. For example, if the expense ratio is 0.6 percent, your expense ratio per $1,000 is $6. In this case, if you have $10,000 in the fund, you are paying $60 annually to own that investment.

Additional 401(k) contributions can reduce your taxes

If you are expecting to save less than the maximum $23,000 for those 49 and under or $30,500 for those 50 and older in your 401(k) contributions for 2024, another reason to put a little more of your paycheck into retirement could be less taxes to pay next year. For example, an individual who is in the 25 percent federal tax bracket saves $1,250 in taxes for every $5,000 he or she invests in a traditional 401(k).

You may have a tax credit for saving

The saver's credit is available for your 2024 federal tax return if your adjusted gross is below $38,250 for individuals, $57,375 for heads of household and $76,500 for couples (filing jointly) and you contribute to an IRA or 401(k). The credit is worth 10-50 percent of the amount you contribute to the IRA or 401(k) up to $2,000 for individuals and $4,000 for couples.

Take your required minimum distributions

The SECURE 2.0 Act of 2022 (SECURE 2.0) was signed into law on December 29, 2022, and changed the required beginning age for required minimum distributions from 72 to 73 beginning in 2023. Individuals born after 1951 must take their first RMD by April 1 of the year following the year in which they turn 73 and by December 31 each year thereafter.

How much do you need to withdraw? The withdrawal amount is based on your account balance divided by an IRS-based estimate of your life expectancy and a spouse’s age can also be used in the formula.