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Financial Planning Tip January 2023

This new year brings us a large number of changes to the laws around savings accounts like IRAs. Here are a few of the most pertinent ones to be aware of:

• Maximum contributions and catch-up contributions for various retirement plans have changed:

o 401(k)/403(b): $22,500; $7500 catch-up for age 50+

o SIMPLE-IRA: $15,500; $3,500 catch-up for 50+

o SEP-IRA limit of $66,000 per year

• Required Minimum Distributions (RMDs) can be delayed for younger taxpayers. If you were born between 1951 and 1959, you can wait until age 73. If you were born in 1960 or later, you can wait until age 75.

• Participants will be able to make Roth contributions to SIMPLE and SEP-IRAs beginning in 2023. In practice, this change took place with eight days’ notice for plan administrators so it may take a while for them to update their systems and paperwork. This will be a welcome option for certain individuals.

• Beginning in 2024, up to $35,000 may be rolled from a 529 college savings plan into a Roth IRA for the 529 beneficiary. There are multiple strings attached, but none are unreasonable. This solves a big drawback to saving aggressively in a 529, and it creates some planning opportunities as well.

Next steps: If you have a retirement plan at work, we recommend making the maximum contribution plus the catch-up if you are able. Contact your plan administrator to make this change if you haven’t already. If you have a SIMPLE or a SEP-IRA, we can help you determine if the Roth option is appropriate for you. If you have a 529 plan or are thinking about contributing, this makes the choice easier since unused funds can be transferred to your child’s Roth. If you have unused funds now, we can help you make that transfer.


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