Money Centered BLOG
“None of us knows when that event might happen that will cause us to suddenly need help.” - Sandy Adams, CFP®
Read the full CNBC article HERE!
Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.
Raymond James is not affiliated with CNBC.
Contributed by: Sandra Adams, CFP®
When we hear the term widow or widower, we picture someone older – someone deep into their retirement years. The reality is, according to the U.S. Census Bureau, the average age of a widow or widower in the U.S. is currently 59-years-old. In my recent experience with clients, I have seen the statistics become reality. Clients becoming widowed well before their retirement years has, unfortunately, become increasingly common. The issues involved with this major, and often unexpected, life transition are not simple and are hard to go through alone.
If you are one that is left behind, there are several action steps that should be taken to get back on your feet and feel financially confident. In most cases, this is the woman (according to the U.S. Census Bureau, 32% of women over age 65 are widowed compared to 11% of men). There is no timetable for when these steps should be taken – everyone grieves in their own time and everyone is ready in their own time to move on and make sound financial decisions at different times. No one should be pushed into making financial decisions for their new normal until they are ready.
The first step is identifying sources of income. For young widows or widowers, you may still be working, but may have lost a source of income when your spouse passed away. Looking at where income might come from now and into the future is important. For young widows, life insurance is likely the source of the replacement for lost income. If you are closer to retirement, you may also have Veteran’s benefits, employer pension benefits, savings plans, home equity, income from investments, and Social Security.
The second step is to get your financial plan organized. Get all of your documents and statements put together and review your estate documents (update them, if needed). A big part of this is to update your expenses and budget. This may take some time, as your life without your spouse may not look exactly the same as it did with him/her. Determining what your new normal looks like and what it will cost may take some time to figure out. And it won’t be half the cost (even if you don’t have children), but it won’t be 100% or more either – it will likely be somewhere in between. Figuring out how much it costs you to live goes a long way toward knowing what you will need and how you will make it all work going forward. Your financial planner can be a huge help in this area.
The third step is to evaluate your insurances (health and long-term care). These costs can be significant as you get older, and it is important to make sure you have good coverage. For younger widows, those that are still working may have health insurance from their employer. If not, it is important to make sure you work with an agent to get counseling on the best coverage for you through the exchange until you are eligible for Medicare at age 65. And for long-term care, if you haven’t already worked with a financial planner to plan coverage and are now widowed – now is the time. Single folks are even more likely to need long-term care insurance than those with a partner.
The fourth step is to work on planning your future retirement income. Many widows don’t think enough about planning for their own financial future. What kinds of things should you be talking to your adviser about?
Income needs going into retirement
The things you would like to do in retirement/their retirement goals (travel/hobbies, etc.)
What financial resources you have now (assets, income sources, etc.)
Risk tolerance
Charitable goals, family gifting goals, etc.
You can work with the adviser to design a tax-efficient retirement income plan to meet your goals with appropriate tools based on tax considerations and risk tolerances, etc.
And the fifth step is to evaluate housing options. We often tell new widows not to make big decisions, like changing homes, within the first year or two. However, many decide that they want or need to move because the house they are in is too big or they just need to make a move. Housing is roughly 40 – 45% of the average household budget – decisions need to be made with care.
For all widows, going it alone can be difficult with a lot of decisions and time spent alone. For many, it is going through the process of redesigning retirement all over again, now alone, when it was meant to be with your long-time partner. And learning to live a new normal and planning the next phase of life that looks entirely different than the one you had planned. With the help of a professional financial adviser, the financial side of things can be easier – the living part just takes time.
Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.
Raymond James and its advisers do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Any opinions are those of Sandra D. Adams and not necessarily those of Raymond James.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services.
The information contained in this blog has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Contributed by: Josh Bitel, CFP®
Planning for retirement is on everyone's mind at some point in their career. But figuring out where to begin to project how much income will be needed can be a tall task. Sure, there are rules of thumb to follow, but cookie-cutter approaches may only work for some. When estimating your retirement needs, here is a quick guide to get you started.
One popular approach is to use a percentage of your current working income. Industry professionals disagree on what percentage to use; it could be anywhere from 60% to 90% or even more. The appeal of this approach lies in its simplicity and the fact that there is a fairly common-sense analysis underlying it. Your current income sustains your present lifestyle, so taking that income and reducing it by a specific percentage to reflect that there will be certain expenses you will no longer have is a good way to sustain a comfortable retirement.
The problem with this approach is that it does not account for your unique situation. For example, if you intend to travel more in retirement, you might need 100% (or more) of your current income to accomplish your goals.
Another challenging piece of the equation is figuring out what your retirement expenses may look like. After all, a plan will only be successful if it accounts for the basic minimum needs. Remember that the cost of living will go up over time. And keep in mind that your retirement expenses may change from year to year. For example, paying off a mortgage would decrease your expenses, while healthcare costs as we age will have the opposite effect on your budget.
In a nutshell, the earlier you retire, the more money you will need to rely on to support your lifestyle. I recently wrote a blog simplifying this topic: click here to see more.
Of course, when you stop working is only one piece of the pie to determine how long of a retirement you will experience. The other, harder to estimate, piece is your life expectancy. It is important to understand that the average life expectancy of your peers can play into the equation. Many factors play into this, such as location, race, income level, etc., so getting a handle on your specific situation is key. There are many tables that can be found online to assist with this; however, I always encourage people to err on the side of caution and assume a longer-than-average life expectancy to reduce the possibility of running out of money.
So you have an idea of how much you spend to support your lifestyle and how long your retirement may last, next is understanding where the money comes from. A good place to start for most Americans is Social Security. Check out http://www.ssa.gov to see your current benefit estimate. Other fixed income sources may include a pension or annuity. Beyond that, we normally rely on investments such as a 401k plan at work or other retirement plans.
In a perfect world, we have added up our retirement lifestyle and compared it with our sources of retirement income, and found that we have plenty set aside to support a comfortable retirement. However, this is not always the case. If you have gone through this exercise and come to the conclusion of an income shortfall, here are a few ideas to help bridge that gap:
Consider delaying your retirement for a few years
Try to cut current expenses so you will have more money to save for retirement
Work part-time during retirement for extra income
As always, an advisor can help with this calculation and inspire confidence in your path to financial independence. Reach out to us today if you are thinking about that light at the end of the tunnel!
Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 72.
Contributed by: Josh Bitel, CFP®
Like most people, you have probably thought of the possibility of an early retirement, enjoying your remaining years doing whatever brings you joy and being financially independent. Whether you have your eyes set on traveling, lowering your golf score, spending more time with your family, or any other hobbies to take up your time, you may wonder… How much money does it actually take to retire at age 55?
If you have thought about retirement, you are likely familiar with the famous “4% rule”. This rule of thumb states that if you withdraw 4% of your investment portfolio or less each year, you will more than likely experience a ‘safe’ retirement, sheltered from the ebbs and flows of the stock market as best you can. However, some may not know that this rule assumes a 30-year retirement, which is typical for most retirees. If we want to stretch that number to 40 years, the withdrawal rate is slightly lower. For this blog, we will assume a 3.5% withdrawal rate; some professionals have argued that 3% is the better number, but I will split the difference.
A key component of a retiree’s paycheck is Social Security. The average working family has a household Social Security benefit of just under $3,000/month. For our calculations, we will assume $35,424/year for a married couple retiring at age 65. For a couple retiring ten years sooner, however, this benefit will be reduced to compensate for the lost wages. The 55-year-old couple will collect $27,420/year starting as soon as they are able to collect (age 62).
For simplicity’s sake, we will assume a retirement ‘need’ of $10,000/month in retirement from all sources. A $120,000/year budget is fairly typical for an affluent family in retirement nowadays, especially for those with the means to retire early. Of course, we get to deduct our Social Security benefit from our budget to determine how much is needed from our portfolio to support our lifestyle in retirement. (Note that we are assuming no additional income sources like pensions or annuities for this example). As the 4% (or 3.5%) safe withdrawal rule already accounts for future inflation, we can apply this rule to determine an approximate retirement fund ‘need.’ See the following table for the results:
As you can see, over $500,000 in additional assets would be needed to retire ten years earlier. These rules can be applied to larger or smaller retirement budgets as well. While this exercise was heavily predicated on a rule of thumb, it is worth noting that no rule is perfect. Your experience could differ considerably from the assumptions listed above.
This exercise was your author’s best attempt to simplify an otherwise exceptionally complex life transition. This is merely scratching the surface on what it takes to retire comfortably. To increase your financial plan’s success rate, many other factors must be considered, such as tax treatment of distributions, asset allocation of your investments, life expectancy, etc. If you are interested in fine-tuning your own plan to try to retire earlier, it is best to consult an expert.
Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Examples used are for illustrative purposes only.
Contributed by: Nick Defenthaler, CFP®, RICP®
When starting a career, we are always told to contribute at least the minimum needed to get the full company match in our 401k (typically between 4% and 8%, depending on how your plan is structured). “Never throw away free money!” is a phrase we use quite often with children of clients who are starting that first job out of college.
But what about those who are well established in their career and fully maximizing 401k contributions ($22,500 for 2023, $29,000 if you are over the age of 50)? They should not have to worry about not receiving their full employer match, right? Well, depending on how your 401k plan is structured at work, the answer is yes!
Let me provide an example to explain what I am referring to:
Let’s say Heather (age 54) earns a salary of $325,000 and elects to contribute 18% of her salary to her 401k. Because Heather has elected to contribute a percentage of her salary to her 401k instead of a set dollar figure, she will max out her contributions ($29,000) by the end of June each year. Let us also assume that Heather receives a 5% employer match on her 401k – this translates into $16,250/yr ($325,000 x 5%). If Heather does not have what is known as a “true up” feature within her plan, her employer will stop making matching contributions on her behalf halfway through the year – the point at which she maxed out for the year and contributions stopped. In this hypothetical example, not having the “true up” feature would cost Heather over $8,000 in matching dollars for the year!
So, how can you ensure you receive the matching dollars you are fully entitled to within your 401k?
The first step I recommend is reaching out to your benefits director or 401k plan provider and asking them if your plan offers the “true up” feature. If it does, you are in the clear – regardless of when you max out for the year with your contributions, you will be receiving the full company match you are entitled to.
If your plan does not offer the “true up” feature and you plan on maximizing your 401k contributions for the year, I would strongly suggest electing to defer a dollar amount instead of a percentage of your salary. For example, if you are over 50, plan on contributing $29,000 to your 401k this year, and if you are paid bi-weekly, elect to defer $1,115.38 every pay period ($1,115.38 x 26 pay periods = $29,000). Doing so will ensure you maximize your benefit by the end of December and not end up like Heather, who maxes out by the end of June and potentially loses out on significant matching dollars.
Subtle nuances such as the “true up” 401k feature exist all around us in financial planning, and they can potentially have a large impact on the long-term success of your overall financial game plan. If you have questions on how to best utilize your employer’s 401k or retirement savings vehicle, please don’t hesitate to reach out to us for guidance.
Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.
Examples are hypothetical and are not representative of every employer's retirement plan. Not all employers offer matching 401(k) contributions. Please contact your employer's benefits department or retirement plan provider for terms on potential matching contributions.
Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.
Contributed by: Sandra Adams, CFP®
I have had some fascinating conversations in meetings with prospective clients over the last several months. Most of these clients have never previously worked with a financial planner, choosing the DIY (“Do It Yourself”) route until now. And for most, now that they are within a few years of retirement, knowing if they truly have the assets and income resources to be able to retire and support themselves throughout their life expectancies is something they do not want to leave to chance.
Going through the in-depth retirement planning process with the assistance of a financial planning professional can help answer the many questions that so many clients have trouble answering on their own or can only guess without accurate analysis. Things like:
When should I take Social Security (or when should each of us take Social Security if we are a married couple)?;
When is the best time to draw pensions and/or should I take the lifetime income benefit (if I choose this option, do I take a straight life payout vs. a payout with a spousal benefit if I am married) vs. the lump sum payout from my pension benefit?;
If I have an annuity(ies), should I use them for income during retirement, and when?;
What accounts do I draw from, and when do I draw from them to pay the least amount of taxes during retirement?
How will I pay for Long Term Care if I do not have Long Term Care insurance?
And most importantly, will I be able to financially support the lifestyle I desire for as long as I may live without running out of money?
Many potential clients I have met recently have come in assuming they will need to work until they are at least 70 (the age of their maximum Social Security age). While they may value their work, in many cases, it has seemed apparent that there was a fair amount of stress involved with the work they are doing. Knowing whether the client could retire earlier than 70 and giving them the CHOICE about when they could retire would undoubtedly put them in the driver’s seat. Knowledge is power!
Doing your retirement planning earlier than later allows you to make the choices you want to make when you want to make them. Knowing where you stand financially, now and into the future, allows you to decide what you want to do and when you want to do it — you are the driver, and you choose the route to your retirement destination!
Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.
Opinions expressed in the attached article are those of Sandra D. Adams, CFP® and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.
Contributed by: Kali Hassinger, CFP®, CSRIC™
For the last several months, we have been monitoring the possibility of a "Secure Act 2.0" being passed into legislation. The initial SECURE Act (which stands for Setting Every Community Up for Retirement) was passed in late 2019, and had far-reaching effects on Required Minimum Distributions, inherited retirement accounts, and expanded the ability to contribute to IRAs.
Throughout the year, there have been talks about additional legislation through the Secure Act 2.0 to further expand access to retirement savings for individuals, small-business employees, employees with student loans, and part-time workers.
On Thursday, December 22nd, Secure Act 2.0 was pushed through as part of the $1.7 billion 2023 omnibus appropriations bill (which is a brief 4,000+ page read). Some of the key provisions contained in the bill include:
Higher retirement plan catch-up limits beginning at age 60 and increasing each year of age. This will likely go into effect in 2024.
Increasing the Required Minimum Distribution age to 73 in 2023, and eventually it will be increased to age 75 over several years.
Requiring employers to auto-enroll new employees into their current 401(k) or 403(b) plans with an automatic contribution increase each year.
The tax penalty for missing a Required Minimum Distribution will be reduced from 50% to 25%, with the future ability to reduce the penalty to 10% if the miss is corrected in a timely manner.
The establishment of a “starter” 401(k) plan or 403(b) plan for employers that do not currently offer retirement plans.
A 100% tax credit for employer matches in newly established employer retirement plans.
Allowing student loan repayments to be treated as retirement plan contributions for company match purposes.
Establishment of a retirement savings Lost and Found for those who have lost track of old retirement plans.
A pension linked emergency savings provision. These accounts must be held in cash and contributions (up to a maximum balance of $2,500) must be treated as retirement plan contributions for matching purposes. Distributions would be tax free.
Emergency withdrawals up to $1,000 every 3 years, or until the previous withdrawal has been paid back, will be allowed from retirement plans.
Part-time employees with 2 years of 500+ hours will qualify for retirement plan participation
The ability to transfer some 529 funds to a Roth IRA in the 529 beneficiary’s name. The amount that can be transferred is subject to Roth IRA annual contribution limits with the lifetime transfer amount of $35,000. Roth IRA contribution income limits do not apply. The 529 needs to have been established for 15 years.
Many of these updates will slowly go into effect over time, and we are continuing to actively monitor and research Secure Act 2.0 as details continue to emerge. We will provide additional information as it is available, but if you have any questions about how this could affect you, please contact your Financial Planner. We are always happy to help!
Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.
The information contained in this letter does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP®, CSRIC™, and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.
Contributed by: Center for Financial Planning, Inc.®
As we mentioned last week, Center team members have written an astounding 59 blogs in 2022! With that much content, it’s easy to miss some of our posts here and there. So, take a look at the list below for some of our Most Underrated Blogs of the Year. There just may be one that peaks your interest!
1. Harvesting Losses in Volatile Markets
Kali Hassinger, CFP®, CSRIC™ discusses several ways you can carry out a successful loss harvesting strategy during inevitable periods of market volatility.
2. What Happens to my Social Security Benefit If I Retire Early?
Are you considering an early retirement? Kali Hassinger, CFP®, CSRIC™ explains how Social Security is one topic you'll want to check on before making any final decisions.
3. How to Find the Right Retirement Income Figure for You
When it comes to your retirement income, you don't want to guess. Sandy Adams, CFP® shows you where you should start to develop the most accurate number for you.
4. Why Retirement Planning is Like Climbing Mount Everest
Nick Defenthaler, CFP®, RICP® shares that our goal as your advisor is to help guide you on your journey - both up and down the mountain of retirement!
5. New Guidelines May Help Retirees Retain More Savings
Josh Bitel, CFP® shares new RMD tables that now reflect longer life expectancies, which means a reduction in yearly required distributions.
Contributed by: Center for Financial Planning, Inc.®
Over the course of 2022, Center team members have written an astounding 59 blogs on topics including retirement planning, market volatility, eldercare, and investment planning - just to name a few. The results are in, and here are our Five Most Popular Blogs to close out the year. Check out our list below to see how many you have read!
1. Is My Pension Subject to Michigan Income Tax?
In 2012, Michigan joined the majority of states in taxing pension and retirement account income. Nick Defenthaler, CFP®, RICP® reviews how these taxes can play a role in one's overall retirement income planning strategy.
2. The “10-Year Rule” Update You Need to Know About
One of the details of the SECURE Act that many of us call the "10-year rule" may be changing slightly. Jeanette LoPiccolo, CFP® shares what you need to know.
3. Strategies for Retirees: Understanding Your Tax Bracket
Michael Brocavich, CFP® describes the two simple strategies that could potentially help reduce the amount of tax due in retirement.
4. The Basics of Series I Savings Bonds
With the inflation increase, Series I savings bonds have become an attractive investment. Kelsey Arvai, MBA shares what to consider before adding them to your portfolio.
5. What is Retirees’ Biggest Fear?
It's not the fear of running out of money. Not the stock market either. Nor loneliness. Sandy Adams, CFP® tells you what it truly is.
Contributed by: Robert Ingram, CFP®
If you are planning your retirement savings goals for the New Year, you may be surprised by how much you can contribute to your retirement accounts in 2023. The IRS has increased the annual contribution limits for employer retirement plans and IRA accounts, as well as the eligibility limits for some contributions. With inflation in 2022 at a 40-year high, many of these increases are also some of the largest in decades. Here are some adjustments worth noting for 2023.
$22,500 annual employee elective deferral contribution limit (increased from $20,500 in 2022)
$7,500 extra "catch-up" contribution if over the age of 50 (increased from $6,500 in 2022)
Total amount that can be contributed to a defined contribution plan, including all contribution types (e.g., employee deferrals, employer matching, and profit sharing), is $66,000 or $73,500 if over the age of 50 (increased from $61,000 or $67,500 for age 50+ in 2022)
Traditional and Roth IRA
$6,500 annual contribution limit (increased from $6,000 in 2022)
$1,000 "catch-up" contribution if over the age of 50 remains the same
Note: The annual limit applies to any combination of Traditional IRA and Roth IRA contributions. (i.e., You would not be able to contribute up the maximum to a Traditional IRA and up the maximum to a Roth IRA.)
SIMPLE IRA
$15,500 annual contribution limit (increased from $14,000 in 2022)
$3,500 "catch-up" contribution if over the age of 50 (increased from $3,000 in 2022)
Contributions to a Traditional IRA may be tax deductible depending on your tax filing status, whether a retirement plan covers you (or your spouse) through an employer, and your Modified Adjusted Gross Income (MAGI). The amount of a Traditional IRA contribution that is deductible is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For example,
Single
Covered under a plan
Partial deduction phase-out begins at $73,000 up to $83,000 (then above this no deduction) compared to 2022 (phase-out: $68,000 to $78,000)
Married filing jointly
Spouse contributing to the IRA is covered under a plan
Phase-out begins at $116,000 to $136,000 compared to 2022 (phase-out: $109,000 to $129,000)
Spouse contributing is not covered by a plan, but other spouse is covered under plan
Phase-out begins at $218,000 to $228,000 compared to 2022 (phase-out: $204,000 to $214,000)
Just like making deductible contributions to a Traditional IRA, being eligible to contribute to a Roth IRA depends on your tax filing status and income. Your allowable contribution is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For 2023 the limits are as follows:
Single
Partial contribution phase-out begins at $138,000 to $153,000 compared to 2022 (phase-out: $129,000 to $144,000)
Married filing jointly
Phase-out begins at $198,000 to $208,000 compared to 2020 (phase-out: $196,000 to $206,000)
You can contribute up to the maximum if your MAGI is below the phase-out floor. Above the phase-out ceiling, you are ineligible for any partial contribution.
Eligibility for contributions to retirement accounts like Roth IRA accounts also requires you to have earned income. If you have no earned income or your total MAGI makes you ineligible for regular annual Roth IRA contributions, using different Roth IRA Conversion strategies could be a way to move money into a Roth in some situations.
As we start 2023, keep these updated figures on your radar when reviewing your retirement savings opportunities and updating your financial plan. As always, if you have any questions about these changes, don't hesitate to contact our team!
Have a happy and healthy holiday season and a great start to the New Year!
Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.
Any opinions are those of Bob Ingram, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.
