A few big changes occurred in the IRA world that we thought would be important to share!
First, for those in the saving/accumulation stage of life, the contribution limits were increased. The base maximum annual contribution limit is now $6,500 for both the Traditional IRA and ROTH IRA (or some combination of the 2, subject to income restrictions) up from $6,000. Savers over the age of 50 get an additional $1,000 bringing their limit to $7,500 from $7,000 last year.
Two important changes for those nearing retirement or currently retired come from the Secure Act 2.0 that was recently passed. The age required to begin distributions known as Required Minimum Distributions or RMDs was pushed up to age 73 for the year 2023. Understanding that people are living longer the Secure Act 2.0 also added automatic increases to the age requirement by going up to age 75 in the year 2033.
Regarding charitable donations, there is an income reduction benefit for those over the age of 70 ½. A gift of up to $100,000 to an eligible charitable organization can avoid being coded as income. The distribution must be paid directly to the 501(C)(3) charitable organization, the use of charitable vehicles like a donor-advised fund does not count. This can be extremely important when you are dealing with programs that have income requirements, like Medicare.
While all these updates should be used with the help of your Financial Advisor, this last one likely also requires the help of a CPA or tax professional as some nuances arise on the itemized vs standard deduction front. There are benefits to be had either way, but a good plan comes from knowing the costs/benefits beforehand.
Taking steps to enhance your retirement plan can add a lot of value! Now is the time to revisit your cash flow and planning needs and get a jump on some financial “spring cleaning”. The earlier you can adopt these changes, the better off you will be in the long run. Thankfully this is not a journey you must go on alone, Callesen Wealth Management specializes in financial planning and Investment management. Our knowledgeable team is ready to help! We would love to hear from you.
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