By Eric Reich
Over the past couple of weeks, we’ve seen some positive adjustments to Social Security benefits, Supplemental Social Security Income (SSI) benefits, and retirement contribution limits. We’ll tackle these updates to Social Security and retirement plans and how they may affect you.
Beginning in January 2023, Social Security and Supplemental Social Security Income (SSI) benefits will increase 8.7 percent for approximately 70 million Americans. On average, this will be an increase of more than $140 per month. More than 65 million Social Security beneficiaries will begin receiving this 8.7 percent cost-of-living adjustment (COLA) beginning in January 2023, and for the more than 7 million SSI beneficiaries, this benefit will begin on December 30, 2022. The annual COLA increase is tied to the Consumer Price Index, which is determined by the Department of Labor’s Bureau of Labor Statistics.
Another piece of good news is Medicare premiums are going down. With those premiums going down and SS benefits going up, this can be a big help for seniors. This is the first time in over a decade that Medicare premiums are not going up. In addition, the maximum amount of earnings subject to the Social Security tax will increase from $147,000 to $160,200 and will take effect in January. If you want to find out what your new benefit amount is, you should receive a notice by mail in early December or you can view the notice online at www.ssa.gov/myaccount .
Also beginning January 1, 2023, individuals with certain retirement plans will be able to invest more due to increases in contribution limits, which are adjusted annually for cost-of-living increases. The amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500. This is up from $20,500 for 2022. The catch-up contribution for those aged 50 and over was increased from $6,500 to $7,500. This means being able to save an additional $3,000 for those over 50 with an employer sponsored retirement plan. Also, the combined total that employers and employees can contribute to a retirement plan was increased from $61,000 to $66,000. Lastly, the limit for annual IRA contributions increased to $6,500 from $6,000.
The IRS also increased the income ranges used to determine whether an individual’s traditional IRA contributions are tax deductible or not. They also increased the income phase-outs and limits for contributing to Roth IRAs. According to irs.gov, the phase-out ranges for 2023 are as follows:
For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000.
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000, up from between $109,000 and $129,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000.
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
For those taxpayers making contributions to a Roth IRA, the income phase-out range was increased to between $138,000 and $153,000 for singles and heads of household, and for married couples filing jointly, it was increased to between $218,000 and $228,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA did not change.
If you have questions about these increases and if they apply to your individual situation, you should consult with your tax advisor and/or financial advisor.
Securities offered through Kestra Investment Services LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services or Kestra Advisory Services. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax adviser with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations. A lifelong resident of Cape May County, Eric resides in Seaville, NJ with his wife Chrissy and their sons ,CJ and Cooper, and daughter Riley.
