Biggest Retirement Changes in 2023

Big changes are likely coming for Americans’ retirement savings. From RMD changes to 401(k) financial incentives, here’s what you need to know.

Many retirement savings accounts have slowly dwindled down due to rising inflation. The cost of food, gas and even rent have skyrocketed. Older Americans and those looking to retire soon are left dealing with the aftermath of trying to find a retirement solution to counteract the damages of 2022.

Here is what you need to know about retirement in 2023 and how to make the most of the new changes to your retirement plan.

Retirement Reform

Retirement reforms were passed by Congress in order to help relieve the pressure of rising inflation for retirees. In 2023, retirees must take out RMDs from their tax-advantaged retirement accounts when they turn 73. This is up from 72, and that age will bump up to 75 in 2033.

Legislation also provides a 500 tax credit for small businesses that meet the following criteria:

  • Allow military spouse employees to become eligible for the employer’s retirement plan within two months of starting a job.
  • Allow these workers to get employer matches before two years of service.
  • Make these workers 100% immediately vested in all employer contributions.

The new bill includes a host of other changes to the retirement system. Which will go into effect later than 2023.

Key Medicare Changes

Medicare is becoming cheaper for millions of retirees, in 2023.

The monthly premium for Medicare Part B will be $164.90 in 2023, a decrease of 3%, or $5.20 a month, from $170.10 in 2022. The annual deductible for all Medicare Part B beneficiaries will be $226 in 2023, down from the annual deductible of $233 in 2022.

Thanks to provisions in the Inflation Reduction Act, 3.3 million Medicare Part D beneficiaries with diabetes will benefit from a guarantee that copays for insulin will be capped at $35 for a month’s supply. Another huge change in 2023? Vaccines covered under Part D will come with no copays or deductibles. That will ease the cost of pricey vaccinations, such as the shingles vaccine.

Social Security Increase

If you receive Social Security benefits, you might be getting a raise next year.

The Social Security Administration announced that the cost-of-living adjustment (COLA) for 2023 will be 8.7%, the largest since 1981. The COLA increase means that average monthly benefits will go up by more than $140 per month in January, according to the SSA.

This is great news for people who depend on their Social Security checks to pay their bills and make ends meet, especially since the U.S. economy has been growing at a slow pace recently and many retirees are struggling to make ends meet with their current income levels.

Retirement Plan Contributions

The Internal Revenue Service announced the annual contribution limits for 401(k)s, IRAs, and other retirement accounts for 2023. If you have one of these accounts, this is good news!

Workers who have a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $22,500 next year—that’s up 9.8% from this year’s limit of $20,500. For those 50 and over, they can save an additional $7,500 in their 401(k), up from last year’s $6,500 catch-up contribution limit. In total, workers who are 50 and older can contribute up to $30,000 starting in 2023.

The annual contribution limit for IRAs next year also increased to $6,500 from $6,000—an increase of 8.3%. Individuals 50 and over can save an additional $1,000 in their IRAs as well—this remains unchanged from last year.

Since the start of the year, Congress has been busy making changes to your retirement options. Here are some of the most important ones:

  • If you’re looking to set up a traditional IRA, you can make contributions that are tax-deductible as long as you meet IRS rules, including income limits. IRA contributions are fully deductible if you (and your spouse) aren’t covered by a retirement plan at work.
  • For 2023, IRA deductions for singles covered by a retirement plan at work aren’t allowed after their modified adjusted gross income (MAGI) hits $83,000, versus $78,000 in 2022. The deduction disappears for married couples filing jointly when their MAGI hits $136,000, up from $129,000 in 2022.
  • Individuals can only contribute to Roth IRAs if they meet certain income conditions. The income phase-out for Roth IRA contributions next year for singles and heads of household will be from $138,000 to $153,000, up from $129,000 to $144,000 in 2022. Married couples filing jointly will see the phaseouts starting at $218,000 to $228,000, up from $204,000 to $214,000.

HSA Changes

Health savings accounts just got a little more generous. The IRS announced that the annual inflation-adjusted limit on HSA contributions for self-only coverage under a high-deductible health plan will be $3,850, up from $3,650 in 2022. The HSA contribution limit for family coverage will be $7,750, up from $7,300.

That’s a 5.5% increase over 2022 contribution limits. A health savings account option is available for people enrolled in a high-deductible health care plan. You can also open an account as a self-employed freelancer or business owner if you have an HDHP.

The IRS sets the parameters for these accounts annually. With a high-deductible plan, you pay a lower premium per month than other types of plans but a higher annual deductible — the amount you pay for covered medical costs before insurance kicks in. Money you don’t use can roll over year after year and can be used for non-qualified expenses after turning 65.

Final Thoughts

While there are a lot of notable changes happening to retirement plans this year, it’s important to have a sound understanding and strategy in place to prepare for 2023.

With this in mind, it’s important to have a financial advisor you can trust. At Agemy Financial Strategies, we specialize in investment strategies and retirement planning. These two go hand in hand when it comes to planning your retirement –present and future!

For over 30 years, Agemy Financial Strategies has helped our clients plan and prepare. This way, when the unforeseen occurs like in 2022, our clients are uniquely positioned for success. We work hard to deliver a dependable retirement income strategy, in any market, so that you can enjoy the “best” of their lives during retirement.

Interested in learning more about retirement planning in 2023? Contact us here today.

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Tax Filing Season Tips with Agemy Financial Strategies

It’s that time of the year… tax season. For the vast majority of Americans who aren’t tax-savvy, dealing with it can be overwhelming. Here’s our top tips to make this year’s tax returns as stress-free as possible. 

Tax filing season is here and many don’t know how to file back their taxes. Many tax payers don’t fulfill their tax filing responsibilities in due time because they look at the whole procedure and may find the process daunting. But if you don’t file correctly, it could cost you big bucks and offset your retirement plan.

Tax Changes from Last Year’s Returns

Stimulus Payments: Unlike 2020 and 2021, there were no new stimulus payments for 2022 so taxpayers should not expect to get an additional payment in their 2023 tax refund. Some tax credits return to 2019 levels. This means that taxpayers will likely receive a significantly smaller refund compared with the previous tax year.

Charitable Deductions: This filing season there will be no above-the-line charitable deductions. During COVID, taxpayers were able to take up to a $600 charitable donation tax deduction on their tax returns. However, for tax year 2022, taxpayers who don’t itemize and who take the standard deduction, won’t be able to deduct their charitable contributions.

How Retirement Contributions Impact Your Tax Bill

If you’ve started contributing to a retirement plan, at work or on your own, the next thing you’ll want to know is how to deal with it on your tax return. Fortunately, entering retirement contributions on your tax return, if necessary, is pretty simple.

Generally, you can deduct contributions of up to $6,000 to a traditional IRA ($7,000 if you are age 50 or older by the end of the tax year) on 2021 and 2022 returns.

Other plans have different limits, which vary based on your age and type of plan. They may also be limited based on your income level.

Considerations and Strategies

Tax filing lasts through April 18, three days later than the normal April 15 deadline for filing taxes. April 18 is also the deadline for requesting an extension, which gives taxpayers until Oct. 16 to file their returns for 2022.

If you’re getting ready to file, try adding some of these tips to your tax preparation this season to make filing easier:

  1. Review your income and deductions: Take a look at your income and deductions for the year to see if there are any opportunities to lower your tax liability. For example, you may be able to claim deductions for charitable donations or for business expenses if you are self-employed.
  2. Consider tax-loss harvesting: If you have realized losses on your investments, you may be able to use tax-loss harvesting to offset any capital gains you have realized during the year. This can help to reduce your tax liability.
  3. Contribute to tax-advantaged accounts: Contributions to accounts like 401(k)s and IRAs can lower your taxable income and potentially reduce your tax burden. If you haven’t already done so, consider making contributions to these accounts in order to take advantage of the tax benefits.
  4. Review your filing status: Your filing status can affect your tax rate and the amount of taxes you owe. If you are married, consider whether it makes sense for you and your spouse to file jointly or separately.
  5. Take advantage of tax credits and deductions: There are many credits and deductions available that can help reduce your tax liability. Make sure to take advantage of all the credits and deductions that you are eligible for in order to minimize your tax burden.

Remember to consult your financial advisor to ensure that you are taking advantage of all available tax benefits.

Ready, Set, File

Once you have factored in the above considerations, here’s how to file your 2022 income taxes:

  1. Start gathering your tax documents: As soon as possible, start collecting all the documents you’ll need to file your taxes, such as W-2 forms, 1099s, and receipts for deductions. This will make the process of preparing and filing your taxes much easier.
  2. Use tax preparation software: Tax preparation software can make the process of filing your taxes much easier and more accurate. There are many options available, ranging from free options for simple tax situations to paid options for more complex situations.
  3. Double-check your work: Before you file your taxes, make sure to double-check all the information you have entered to ensure that it is accurate. This will help to reduce the chances of errors and potentially save you time and money in the long run.
  4. File your taxes electronically: Filing your taxes electronically is generally faster and more accurate than filing a paper return. Plus, you’ll get your refund faster if you choose to have it deposited directly into your bank account.

By following these tips, you can help to make the process of filing your 2022 income taxes as smooth and stress-free as possible.

Don’t Forget to Do Your Homework

Give your future self a hand and prepare for next year’s taxes by considering any and all missteps you experienced this year that made filing your taxes more difficult. For example, making an appointment with your financial advisor, keeping better track of important documents, and updating the amount of tax withheld from your paycheck in the upcoming year can make filing next year that much easier.

While paying attention to tax strategies for your retirement income is important, there is no single right strategy. Read up on the updates to the taxes to make sure you’re familiar with them and fully understand what they’ll mean as you file.

Finally, consult with your Fiduciary advisor to make sure you’re not missing out on further tax-strategies that could help boost your retirement savings. From reassessing your investments to postponing RMDs, Agemy Financial Strategies has over 32 years of experience in tax-strategizing to maximize retirement income in your golden years.

Let’s put together your personalized plan with a complimentary strategy session. Set yours up here today.

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