2023 Inflation Adjustments for Qualified Retirement Plans and Accounts

Inflation adjustments for Qualified Retirement Plans.

No matter where you’re located in the country or your circumstances, the financial landscape continues to shift. Getting the most out of your savings plan is critical for those planning or nearing retirement. To help boost savings for retirement, the IRS recently announced inflation adjustments for qualified retirement plans and accounts.

Inflation Adjustments for Qualified Retirement Plans and Accounts for 2023

On Friday, October 21, 2022, the IRS announced the 2023 dollar-amount thresholds and ceilings as adjusted for inflation. This plan will be applied to a wide array of retirement accounts and plans, including Roth IRAs, individual retirement arrangements, and elective deferral plans under Sec. 401(k) and Sec. 403(b) and most plans under Sec. 457.

Some of the specifics of this announcement are as follows*:

  • $22,500 is the limit set as the amount individuals can contribute to Sec. 401(k) plans in 2023, which is an increase from $20,500 for 2022 – it is applied to most Sec. 457 plans, Sec. 403(b), and the federal government’s Thrift Savings Plan.
  • The IRA annual contributions were increased to $6,500, up from $6,000. Also, the limit for catch-up contributions for IRAs for those 50 and over will not be subjected to an annual cost-of-living (COLA) adjustment and is still $1,000.
  • The catch-up contribution limit for employees 50 and over who participate in 401(k), 403(b), and most 457 plans, and the federal Thrift is $7,500, up from $6,500.
  • The SIMPLE retirement accounts threshold increased to $15,500, up from $14,000. In addition, catch-up contribution limits for those 50 and over using SIMPLE plans increased to $3,500 from $3,000.
  • The income limit for saver’s credit for low- and moderate-income workers is $73,000 for married couples filing joint returns, up from $68,000; heads of households is up to $54,750, from $51,000; and singles and married people filing separately is up to $36,500 from $34,000.

Overall, the IRS has implemented these new changes to help those at or near retirement age. If you have questions regarding any of these changes, we would be happy to help answer them. Contact us today.

Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.

*Source: Journal of Accountancy

3 Retirement Mistakes to Avoid

Retirement mistakes concerned couple.

Too often, people make retirement mistakes that may condemn their golden years to financial insecurity and anxiety. However, by being aware of common pitfalls, you can avoid them and set yourself up for a bright future. Here are three retirement mistakes to avoid.

1. Not Having a Plan at All

While it may be tempting just to let retirement happen, this can be a dangerous approach. Without a retirement plan, you’re just winging it and hoping for the best. This is not a sound strategy.

You need to know the adequate amount of retirement money, where that money will come from, and how you’ll make it last. Retirement planning can help you figure all of that out.

2. Relying Too Heavily on Social Security

Social security was never meant to be a retiree’s sole source of income. It was initially designed as a safety net to supplement other sources of retirement income.

However, an estimated 40 percent of Americans rely on social security as their only source of income in retirement. This can be an issue. The amount you receive from social security is relatively modest and may not be enough to cover all of your costs.

3. Life Insurance Retirement Mistakes

Many people make the mistake of cashing in their life insurance policies when they retire. However, this is usually not a good idea.

Life insurance can be an important source of retirement income, so it’s usually best to keep the policy in place and use it as needed. However, there are other ways to get money if you need it, such as taking out a loan against your policy’s cash value.

Avoid Retirement Mistakes to Enjoy Your Golden Years!

Retirement can be a wonderful time of life, but only if you’re prepared for it. If you can avoid common retirement mistakes, you’ll be on your way to a bright future.

Would you like to learn more about retirement planning? Contact us today. We offer a variety of resources to help you plan for retirement and make the most of your golden years.

 

Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.

5 Tax Filing Strategies for the Self-Employed

Tax filing strategies self-employed.

In this article, we will discuss tax filing strategies for the self-employed because filing your taxes as a self-employed person can seem like quite a task. And, if you have never filed business taxes before, you might not know where to begin. So let’s get started.

Separate Your Business Finances from Your Personal Finances

Most first-time business owners tend to mix their business and personal finances, which may cause them to mess up when filing their taxes. One of the most common ways most self-employed people get into tax trouble is by having their personal expenses recorded as business expenses.

The first thing you should do when you start a business is to create a new bank account. Having separate accounts makes filing taxes easier. This is because you’ll have your own private personal transactions and clean and accurate business records.

Keep Clean and Accurate Records

Filing taxes is easier when you have accurate records. And having all your invoices and outgoing receipts with you or using software that calculates the taxes is an efficient way to do it. It may also get you out of trouble if the IRS comes knocking on your door.

Familiarize Yourself With All the Tax Jargon

You should take some time and learn all the accounting and tax jargon that will help you understand your finances better. Some of the standard terms you need to familiarize yourself with include:

  • Revenue — the amount you earn after selling your produce/ services.
  • Cost of goods sold — the amount of money you spend producing goods.
  • Gross profits — the amount left over after subtracting the cost of goods sold from the revenue.
  • Net sales — the total profit made after deducting all expenses incurred from the revenue.

Pay the Estimated Quarterly Taxes

The IRS requires all businesses that owe more than $1,000 to pay quarterly taxes yearly. Start by estimating your yearly tax bill and fill out the tax form on the 15th of these months; April, June, September, and January.

Plan for Payroll Taxes

You are legally obligated to pay some employment taxes if you have steady staff on payroll. Some of the taxes you need to consider per employee include:

  • Medicare
  • Federal income tax
  • Social security tax

Some apps and software such as Gusto, Homebase, and ClockedIn can assist you in planning the appropriate employment taxes and ensure you comply with all tax laws.

Get Professional Advice

Taxes can be confusing for business owners; just because you’re good at running a business doesn’t mean you are good at accounting or tax preparation. At Quantum Strategies Wealth Advisory, we take a unique approach and act as “business advisors,” working in collaboration with our clients’ accountants, attorneys, and other professionals. Our team is happy to make an introduction on your behalf to a qualified tax professional. Contact us when you’re ready!

 

Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.

How Much Money Do You Need for Retirement?

How much money do you need for retirement?

Even if you meticulously review your retirement savings and anticipated retirement plan, inflation, volatility in the stock market, and unexpected bills can derail your strategy. So how much money do you need for retirement? Here are a few things to keep in mind.

Rising Costs (and the Future Impact of Inflation)

Rising costs caused by inflation can erode your purchasing power in retirement. The savings that you thought would be sufficient may no longer be enough.

Take inflation into account when deciding how much you need to save for retirement. Look for a comprehensive calculator that considers inflation when calculating your savings goal.

For example, the retirement savings calculator at Bankrate includes an expected inflation rate of 2.9 percent but allows you to adjust the number for more accurate projections.

To increase the chances that your investment returns outpace inflation, utilize a variety of savings options.

Market Volatility

It can be disheartening logging into your retirement account to see the value of your account has dropped significantly in a day.

However, it’s important to remember that it’s normal for investments to fluctuate in value; consider focusing on creating a mix of investments that have the opportunity to increase in value over time.

Another thing to remember is that you don’t lock in your losses until you sell your funds. Avoid panic selling in an attempt to minimize future losses; panic selling locks in your losses and reduces your overall returns.

If you’re worried about your ability to not panic during market volatility, consider avoiding checking your account daily; this may only fuel your anxiety.

Make sure you’re invested in funds that are suitable for your preferred risk level. As you near retirement, consider keeping the portion of your savings that you’ll need over the next few years in an investment option that may retain its value even with market fluctuations.

Unexpected Expenses

You’re facing an unexpected medical bill, or your car needs expensive repairs. Don’t let these unexpected bills cause your retirement savings to fall short.

Make sure that you’re prepared for these irregular expenses by setting up an emergency fund or sinking fund. An emergency fund ensures you have money available for true financial emergencies, like job loss.

A sinking fund is an account you use to set aside money for expenses that you can anticipate but tend to overlook when budgeting. This includes things like:

  • Car repairs and maintenance
  • Home maintenance and repairs
  • Holiday expenses
  • Medical and dental expenses
  • Insurance premiums

Review your bank statements to see how much you spend on these items, and then set aside a certain amount each month to fund the account before you need it.

For example, if there are six months until the holiday season and you usually spend $2,000, set aside $334 each month to prepare for holiday expenses.

Consider Getting Help Revamping Your Retirement Savings Strategy

Feel your retirement savings strategy needs updating? Contact us for help with your retirement savings management.

Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.

3 Retirement Tax Considerations You May Want to Prepare For

You’re steadily increasing your retirement contributions while paying down debt and giving some serious thought to your desired lifestyle in retirement. One thing that many would-be retirees fail to consider is how taxes will impact their retirement. Here are three retirement tax considerations you may need to anticipate.

1. Withdrawals from Your Retirement Plan Are Taxable

One of the benefits of using a tax-advantaged account to save for retirement (like a 401(k) or traditional IRA) is that you can deduct your contributions on your taxes, allowing you to reduce your tax liability.

However, when you withdraw money from these accounts, you’ll have to pay taxes on your withdrawal. If you plan on withdrawing a certain amount to cover your expenses, you’ll need to take out more money to pay taxes on this withdrawal.

For many people, tax-advantaged accounts are still a smart option for saving for retirement, as many individuals are in a lower tax bracket in retirement.

There are a couple of ways to deal with retirement withdrawal taxes. You can adjust your withdrawals to include the taxes or adopt a tax strategy to minimize your tax liability.

Another alternative is to use after-tax retirement accounts, like the Roth IRA or Roth 401(k), to reduce your tax liability on retirement withdrawals. You pay taxes on your contributions to these accounts, but your money can grow tax-free. Your qualified withdrawals are also tax-free.

If you anticipate being in a higher tax bracket during retirement or want to hedge your bets, utilizing after-tax accounts is an excellent option to explore.

2. Your Property Taxes are Likely to Increase

Retirees who plan to own property in retirement should expect their property taxes to increase at some point, usually due to increases in their property’s assessed value or increases in their state and local property tax rates.

Leave a little room in your budget to accommodate increases in your property taxes. You should also see if your state or town offers programs permitting individuals who meet certain age or income guidelines to reduce their property taxes.

Or, if you’re planning to relocate during your retirement, consider an area known for having affordable property taxes.

3. Your Roth IRA Needs to Meet Certain Guidelines for Tax-Free Withdrawals

Many individuals embrace the Roth IRA to provide them with tax-free distributions during their retirement. However, to make sure that your distributions are always tax-free, your Roth IRA must adhere to the following guidelines:

  • You’ve had your Roth IRA for at least five years
  • You’re 59.5 or older

If your Roth IRA is less than five years old, your withdrawals are potentially taxable, even if you’re 59.5 or older. Note that your retirement contributions always qualify for tax-free withdrawals; it’s your Roth IRA earnings that are subject to taxation.

Create a Financial Plan to Prepare for Your Retirement

Want to confirm that your retirement and investment strategies are right for your financial needs? Contact us today so we may help you to build and protect your wealth.

Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.