Great News for Savers in 2023

December 13, 2022

With the end of the holiday season right around the corner, we start looking ahead to a new year and new financial opportunities that can help impact our goals. Now is a great time to begin planning for 2023 and the perfect opportunity for you to save more in tax-deductible retirement plans.

For weekly insights, follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.

Defined Contribution Plans (aka 401(k)-style plans)

For 2023, the IRS made changes to over 60 tax provisions. This includes updates to contribution limits for 401(k) style plans. For people in a company with a 401(k)-style plan, the max amount you can defer has increased from $20,500 to $22,500. For those age 50 or older, the ‘catch-up’ provision allows for an additional $7,500 (up from $6,500 this year), bringing your total possible contribution to $30,000. This is a great opportunity for employees to increase retirement savings and save additional money on taxes if in a higher tax bracket. For more insight on upcoming tax changes, check out our recent article.

Action: In January, contact your HR department and have them increase your payroll deduction contribution based on the new limits.

Traditional and ROTH IRAs

ROTH and Traditional IRA limits will also increase in 2023. Next year you can contribute up to $6,500, up from $6,000 this year. In addition, if you turn age 50 or older in 2023, you may make an additional $1,000 catch-up contribution. Keep in mind, there are income thresholds you must be under to qualify for contributions. However, these thresholds have also increased for 2023.

Action: If possible, make your full contribution early in January versus making monthly contributions. This gives your money a full 12-month head start on growth.

Backdoor ROTH IRA

If you are not eligible to make a Traditional or ROTH IRA contribution because your income is too high, the Backdoor ROTH IRA may be an option. With this strategy, you make a non-deductible IRA contribution (there are no income limitations), then immediately do a rollover to a ROTH IRA.

Action: Determine if a Backdoor IRA is a good strategy for you. If so, act early in the year.

Every situation is different, so consult your tax or financial advisor before implementing these strategies.

Important Disclosure Information

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Welch Group, LLC [“Welch”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Welch. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Welch is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Welch’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.welchgroup.com. Please Note: Welch does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Welch’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Important Video Disclosure Information

The video segment by The Welch Group, LLC (“Welch) was intended for general information purposes only. No portion of the video serves as the receipt of, or as a substitute for, personalized investment advice from Welch or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither Welch’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if Welch is engaged, or continues to be engaged, to provide investment advisory services. Welch is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Welch is engaged, or continues to be engaged, to provide investment advisory services. Copies of Welch’s current written disclosure Brochure and Form CRS discussing our advisory services and fees are available upon request or at www.welchgroup.com.

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