With 2022 behind us, we’ve done the research into some of the biggest questions we face in the years to come. We’ve seen drastic changes in the economy, and it seems like we aren’t out of the woods yet, even with Covid out of sight. In this blog post, we discuss the stock market, challenges with investing, changes to financial planning, and the economic outlook for 2023. 

2023 Key Financial Data

For 2023, the government rolled out updated IRS limits and tax tables, which contained plenty of new information. However, these are the most important points we should all take note of: 

  • IRA and Roth contributions were increased to $6,500
  • 401(k) Elective Deferrals increased to $22,500 over 50, with a catch-up of $7,500
  • Defined contribution plan limits increased to $66,000
  • HSA contributions increased to $7,750 per family and $3,850 per individual 

Be sure to approach your HR or update the files on your system to ensure that you get the most out of your vehicles. Moreover, there are other updates, including: 

  • Gift tax annual exclusion up to $17,000
  • Standard Deduction, MFJ: $27,700; Single: $13,850 
  • 2022 Tax filing deadline: April 18th 
  • Updated tax rate schedule, SS benefits, and Medicare deductibles and premiums 

Secure Act 2.0 

There are also many key changes made to the Secure Act that have been applied to the following sections.

Required Minimum Distributions 

As of January 1, 2023, RMD has increased from age 72 to 73, which will increase to 75 in 2033. If a member turned 72 during or before 2022, then prior rules will apply. Also on January 1, 2023, the penalty for failing to take the correct RMD decreased from 50 percent to 25 percent. Starting on January 1, 2024, Roth 401(k) accounts will be exempt from RMD requirements. 

Higher Catch-up Distributions 

Starting on January 1, 2025, for those between the ages 60 to 63, their 401(k) catch-up contributions will go up to $10,000 in workplace plans indexed for inflation, while the current amount is $7,500. 

Members making more than $145,000 in the prior year will be limited to Roth contributions. While starting from January 1, 2024, IRA catch-up contributions for members 50 and older will be indexed for inflation, which is currently $1,000.

Qualified Charitable Distributions 

As of January 1, 2023, members who are 70 ½ years of age and older are allowed to use RMD for a one-time gift of up to $50,000 of QCD to a charitable remainder trust (CRT), a charitable annuity trust (CRAT), or a charitable gift annuity. 

Retirement Plans for Employers 

From January 1, 2023, employers can opt to match Roth contributions, and employers starting a new 401(k) or 403(b) plan in 2025 or later will need to enroll eligible employees at a 3 percent minimum contribution rate. Employers will have the ability to match employee student loan payments and payments to their retirement accounts starting in 2024.

529 Plans

If a member has held a 529 plan for the last 15 years, it can be rolled over to a Roth IRA for the beneficiary. This is subject to the lifetime cap of $35,000 and annual Roth contribution limits. 

2022 Market Recap 

2022 had a devastating effect on the economy and as a result, we experienced a downward trend in the following areas: 

  • The US Stock Market by -19.21 percent
  • International Developed Stocks by -14.29 percent
  • Emerging Markets Stocks by -20.09 percent
  • Global Real Estate by -24.36 percent
  • US Bond Market by -13.01 percent
  • Global Bond Market except for the US by -9.76 percent

Moreover, some of the top-performing tech giants also faced challenges in 2022, including Russell 3000, Apple, Google, Amazon, Netflix, and Facebook. 

Navigating Volatility

Fortunately, there are tools that we can deploy to build on wealth dimensions, which are: 

  • Aligning risk and reward inside of plans 
  • Proper diversification
  • Rebalancing strategy 
  • Tax loss harvesting 

Conclusion 

The year 2022 was one of the most challenging years in recent history, and a wide range of data shows this. We must make the necessary adjustments to ensure the survivability of everyone in the economy, especially those who are the most vulnerable to the volatility of today’s markets — our retirees. Hopefully, analyzing the data collected from last year’s markets will help us better prepare for the year ahead. 

For informational purposes only. Not intended as investment advice or a recommendation of any particular security or strategy. Past performance is not indicative of future results. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. For more information about Wealth Dimensions, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov or contact us at 513-554-6000. Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.