Over the last year, inflation has made cars, food, and many other items more expensive. But there are other aspects of your financial life that are affected by the inflation rate as well. If you receive social security your monthly amount was bumped up 8.7% recently due to the annual cost of living adjustment (COLA). The government also has made adjustments to 401k limits, IRA contribution limits and the standard deduction on your tax return. Here are some details:
401(k) / 403 (b) contributions
For 2023 an individual can contribute $22,500 to their 401k or 403b plan. If you are over 50, the new catch-up amount is $7500 bringing the total to $30,000. Unless your income has also increased significantly, you may want to review the monthly percentage you contribute to your retirement plan if your goal is to max it out each year.
IRA contributions
IRA and Roth IRA contribution limits have also been raised. $6500 for a traditional or Roth IRA plus another $1k catch-up amount if you are 50 or over.
Standard deduction
Most married taxpayers now use the standard deduction when filing. The standard deduction has been raised for married filing jointly (MFJ) to $27,700 and the amount for a single filer is now $13,850.
Other
Income tax brackets, long-term capital gains brackets and IRA phaseout limits have also increased. Consult your tax professional to see if and how these might affect you.
Also, feel free to download this handy chart that contains all the relevant changes for 2023
SECURE Act 2.0
In addition to the changes in the limits above, Congress recently passed new legislation that affects many retirement accounts. Maybe the most important change is that the age you are required to take distributions from a qualified account has been moved back to 73 or 75 depending on your age. The legislation is extensive and a bit complex but there are other provisions that affect inherited IRAs, 529 accounts & Roth IRAs, and provide Roth options for SEP and SIMPLE accounts. This is a good overview of the various rules.