Translations from Your Trusted Advisor.
With inflation running at 30 year highs the IRS has been busy updating various items that are tied to inflation. On October 21, 2022, the Internal Revenue Service issued Notice 2022-55 announcing retirement plan cost-of-living adjustments (COLAs) applicable to 2023.
Over the summer the Inflation Reduction Act (oxymoron anyone?) was passed by Congress and signed into law by President Biden. Although most of the provisions affect Business taxpayers, there are some items of interest to the individual taxpayer.
As stocks have taken a dip in 2022, with potential for the market to become a bear market, this may be a good time to consider converting retirement assets to a Roth IRA. Transferring funds from a traditional IRA or 401 (k) plan into a Roth account can be beneficial over the long-term because the assets grow tax-free in a Roth account, whereas in a traditional account an investor owes the taxes at distribution time.
Looking to save for retirement and maybe even save on you 2021 taxes?
While you cannot contribute more to your employer sponsored retirement account after year end, you may be able to contribute to an Individual Retirement Account. The deadline to contribute to an IRA for 2021 is April 18, 2022. Depending on your adjusted gross income, you may be able to take a deduction for a portion of your contribution, even if you are offered a retirement plan at your employer. If only your spouse is covered by a retirement plan at work, the income limits are more generous.
Yesterday, the IRS released Notice 2021-61 which provides cost of living adjustments for retirement plans for 2022.
401(k), 403(b), most 457 plans, and Thrift Savings Plan contribution limits have increased $1,000 to $20,500. The annual catch-up limitation for employees over age remains unchanged from 2021, at $6,500.