New Year, New Opportunities
A sense of optimism and hope generally accompanies the start of a new year. There are plenty of articles about goal setting and habit tracking. A clean slate ahead. An old year behind. How will life be different 12 months from now? What will fill these blank pages on the calendar?
While you might set physical, emotional, and professional goals, don’t forget about financial goals.
A new year brings new opportunities. As you consider where you are financially and where you’re going, you should regularly confirm you’re taking advantage of the tools available to you. The IRS has increased limits for various savings tools. In calendar year 2023, you can now contribute up to $22,500 to your employer 401(k) or 403(b). If you are 50 or older, you can add another $7,500 (bringing your total 2023 contribution to $30,000). Not in a position to put that much away? That’s OK. Saving at a level that works for you is key. If your employer offers to match your contribution, it benefits you to take advantage of that match.
If you have a traditional IRA or Roth IRA, you can contribute up to $6,500 to it this year. If you are 50 or older, you can add $1,000 to that (bringing your total contribution to $7,500). However, not everyone is eligible to contribute to a Roth IRA. If your income exceeds a certain limit, you may not be able to add funds to your Roth IRA. Consult with your tax advisor to confirm.
Speaking of Roth savings options, now is a good time to check if your employer retirement plan offers a Roth option. Many 401(k) plans allow employees, regardless of income, to contribute to a Roth 401(k). The dollars you contribute are taxable when they are transferred in to the plan. Those funds then grow tax-free and distribute tax-free in retirement. To reiterate, there is no income limit to make a contribution to a Roth 401(k).
Do you contribute to a health savings account? The IRS is allowing you to add a few extra dollars there as well. Individuals can contribute up to $3,850 in 2023; families can contribute up to $7,750.
Have you met the maximum for your savings options? There are other places to allow your money to grow on a tax-preferred basis. Annuities and whole life insurance can be structured a number of ways, and are pieces to consider within your plan, that often provide flexibility and peace of mind in retirement. It’s always a good time to check in with your financial advisor and review your overall plan.
Cheers to taking steps toward financial fitness in 2023!