Over the past year or so, we’ve seen that dark pandemic cloud finally start to retreat a little further. And, while Covid has left more than a few changes in its wake, the rampant inflation we’ve all been experiencing has to be the most obvious, which we’re reminded of each time we pay for necessities like gas and groceries.
In order to counteract some of the damage that inflation has inflicted on both our current buying power and our retirement plans for the future, the IRS has made some far-reaching changes that will allow us to put away more money for retirement in the coming years, along with some tax adjustments like raising the standard minimum deduction.
Among these changes:
- The annual contribution limits for both IRA and Roth IRA accounts will increase by $500 next year, taking them from their current $6,000 to $6,500. If you’re 50 or older, the new catch-up limit is $7,500.
- The maximum annual employee contribution limit for 401k or 403b accounts will increase from $20,500 to $22,500. In addition, the catch-up provision for those 50 and older will allow contributions of up to $30,000, a substantial increase from their current $27,000 limit.
- The Income limit for Roth IRA contributions will also be going up. If you’re a single filer, the new income limit will be $153,000, and for married couples, it increases to $228,000.
- Congress is on the verge of passing Secure 2.0, a new law allowing retirement savers between the ages of 62 and 64 to put up to $10,000 towards 401k and 403b catch-up contributions. You won’t be able to deduct these contributions from your taxes, but you also won’t get taxed on these new contributions when they’re pulled out after the age of 59.5.
- This same law will also allow people to defer taking distributions beyond age 72 to age 75 by 2030.
There are also some other updates coming soon that are intended to keep Social Security solvent for the long term.
Knowing that these changes are coming may alleviate some surprises, but it isn’t enough to make them work to your maximum advantage. With the end of the year right around the corner, now is a great time to get a real-world explanation of the rules and tax changes that lie ahead, and how you can harness them for your benefit. Join Richard and Angela for a new episode of A Place of Possibility™ as they clarify what these IRS updates will mean for you and what year-end financial moves you might want to comtemplate making.
The last couple of years have brought dramatic changes that none of us could have possibly seen coming. But the government is making moves, and we’re here to help you make the most of your money as we forge ahead into the New Year. Time is running out, so press play today!
P.S. Looking to meet with Richard or Angela at our office in Alamo, CA? Want to discuss more of what you heard in this episode? Wondering where the heck you need to get started or what all of this means for your retirement plans? Schedule a free 30-minute session and find the peace of mind you deserve for the rest of your life. You can also reach us by calling 925.736.6410 or sending an email to Info@APlaceOfPossibility.com.
“With Secure 2.0 it seems like the Federal Government has a vested interest in assuring that our money will last for a longer period of time. You know, we've got 80-year-olds taking like 10% of their IRAs out every year. That's not sustainable. And it's rare that we all say we agree with something Congress is doing. Very rare, but this is one of those times, that we agree.”
A Glance at this Episode:
2:37 These upcoming changes to the tax code should help keep your retirement plans on pace, despite current inflation. Remember those new contribution limits for IRAs and Roth IRAs we mentioned above. This is where we dig into the details.
4:26 Most of us probably aren't familiar with Secure 2.0, but this law is about to be passed by Congress. Here's what it will mean for you and your retirement savings.
5:56 We're now living longer, for the most part, and several of the IRS's upcoming changes are meant to accommodate this shift. Here's an excellent example of why a change was so sorely needed to keep our retirement systems solvent.
6:23 If you've inherited someone else's IRA account — or are about to — there is a new required minimum distribution table that reflects a longer life expectancy. You'll need to stay on top of these calculations here. If you don't, there is a hefty penalty you will incur.
11:34 Self-employed or maintain your own retirement? This one is for you. If you have a defined contribution plan, the limit has gone from $60,000 to $66,000 per year, and if you have a defined benefit plan, the maximum you can put away is $265,000 in 2023.
12:17 It's not by much, but Medicare premiums are dropping in the coming year. If you're enrolled in the lowest premium, you'll save around $5.00 a month, and if you're enrolled in the higher tier Medicare plans, it's about $18.00.
13:17 There are changes coming to insulin costs too. Copays will be capped at $35, and there is no deductible for Part D or Part B-covered insulin.
14:15 If you're enrolled in Medicare, don't forget to review your drug plan during the open enrollment period. It can save you thousands!
16:29 Next up, Social Security! In 2023, taxes will cover more wages, so you'll now pay tax on $160,200 of earnings.
17:19 On the flip side, if you're already collecting Social Security, you'll be looking forward to an 8.7% increase on your monthly check, woo-hoo!
19:03 Now, we're going to take a look at your income taxes for next year. The standard deduction moves to $13,850 for single taxpayers and $27,700 for those filing jointly.
19:33 Are you over 70 years old and make fairly regular charitable contributions? Then, consider doing a qualified charitable distribution to reduce your tax liability.
20:54 If your income spiked in the previous year but will be reduced, you'll want to get in touch with the Social Security Administration and file an SSA-44 to report your life-changing event and lower your Medicare premiums to where they should be.
22:38 Do you anticipate being in a lower tax bracket in the coming year? Here are a few other planning tools to help you save.
23:53 If you're looking for a last-minute tax deduction, consider using a donor advised fund. For those who are charitably inclined, it can make a big difference in your tax liability.
25:06 Did you know that you can also contribute appreciated securities to your donor advised fund and get a tax deduction based on the fair market value now? Here's what you need to know.
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Links/Resources Mentioned in this Episode:
- Ensure your family’s wealth will live on for generations to come. Order your copy of Endless Inheritance by Richard Del Monte today! https://aplaceofpossibility.com/endlessinheritance
- Ready to become a better investor? We’ve got the strategies you need. Download a FREE copy of our e-book, “Evidence-Based Investment Insights.” https://mailchi.mp/aplaceofpossibility/dmgevidencedbasedinsights
- If you’d like to know more about DMG’s approach to investing our clients’ assets, we encourage you to download a copy of The Investment Answer, which we now have available as an eBook. It’s a very easy read — you can probably get through the entire eBook in just one evening — but it has the potential to revolutionize your relationship to investing and help you avoid many, if not all of the mistakes you may be making without even knowing it. To get your copy, visit https://APlaceofPossibility.com/DMGInvestmentAnswerEbook.
- Del Monte Group offers a variety of free resources to help you make innovative and educated financial decisions so that you can keep, grow, and enjoy your wealth starting now. Find them by visiting https://aplaceofpossibility.com/resources.
“One-size-fits-all” won’t fit you here! The Del Monte Group team understands that everyone’s financial goals are unique. That’s why we always provide customized advice. No matter where you are in life, you can depend on our proven expertise to provide financial planning support for long-term success. Ready to get started? Schedule a meeting with Richard or Angela in our Alamo, CA based office today or we can meet via Zoom! >> You can select a date and time that works for you via our calendar, call us at 925.736.6410, or send an email to Info@APlaceOfPossibility.com. We can’t wait to help you!