2023 Financial Planning Updates

401(k), 403(b), 457 and Thrift Savings Plans:

The amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 in 2022.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan has increased to $7,500, up from $6,500.

In total, participants aged 50 and over can contribute up to $30,000 ($22,500 + $7,500) beginning in 2023.

Traditional and Roth IRAs:

The limit on annual contributions to an IRA or Roth IRA increased to $6,500, up from $6,000 in 2022.

The IRA catch-up contribution remains $1,000 for individuals aged 50 and over (and is not subject to an annual cost-of-living adjustment).

The income phase-out range for taxpayers making contributions to a Roth IRA has increased to between $138,000 and $153,000 for singles and heads of household. The income phase-out range has also increased for married couples filing jointly to between $218,000 and $228,000 of adjusted gross income.

Health Savings Accounts (HSAs):

Individual contribution limits will increase to $3,850, up $200 in 2022, and the limit for families will be $7,750, up $450 in 2022. Remember, the HSA is a great way to save for future health care needs as you receive a tax deduction today for contributions. The HSA balance can grow tax deferred through various investment vehicles depending on your plan, and the proceeds also come out completely tax-free for qualified medical expenses. 

Social Security Updates:

On a yearly basis, the Social Security Administration reviews the general cost of living and adjusts its benefit offerings. For the upcoming 2023 calendar year, the cost-of-living adjustment increased by the highest amount in more than 40 years at a rate of 8.7%—a direct response to elevated inflation levels that hit 8.2% year-over-year in September 2022. This cost-of-living adjustment translates to an increase from $1,680 to $1,827 for the average retired worker monthly benefit, according to the Social Security Administration.

Additionally, in line with the increasing Social Security cost-of-living adjustment, beneficiaries will experience a decrease in standard premiums for Medicare Part B, which is set to fall to $164.90 starting in January 2023. Medicare Part B payments are often directly deducted from monthly Social Security allotments before they reach recipients’ bank accounts.

These changes are expected to benefit more than 70 million Americans currently receiving benefits. However, it’s also important to understand that the cost-of-living adjustments also benefit those still waiting to start their benefits, as future benefits increase by the same adjustment as those currently receiving benefits.

These are just a few of the main updates announced for 2023. It’s important to continue to monitor your personal financial plans to make sure you’re taking advantage of these strategies as they pertain to your own unique situation. For further guidance on the subject, stay tuned to the AAA Minneapolis website for our upcoming Savvy Social Security seminars where these updates and more will be covered in greater detail.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

Steven C. Finkelstein, CFP®, Megan E. Gehrman, CFP® and Luke J. Strom, CFP® are Financial Advisors at Sterling Retirement Resources, Inc., 120 Broadway Ave. S., Suite 200, Wayzata, MN 55391. 763-762-3400. Securities and advisory services offered through Cetera Advisor Networks LLC, Member FINRA/SIPC, a Broker-Dealer & Registered Investment Advisor. Some advisory services also offered through AdvisorNet Wealth Management. Cetera is under separate ownership from any other named entity.