Around this time of the year 2023, government bodies that annually adjust benefits, thresholds, and other areas for inflation frequently release their statements. We are all aware that the COLA for CSRS and Social Security is 8.7%, and for qualifying FERS employees, it is 7.7%. Consequently, the Social Security earnings test and the cash amounts used to calculate Social Security retirement payments have also increased.
The Thrift Savings Plan and Individual Retirement Arrangements are affected by changes that the Internal Revenue Service has announced. Although you may have already heard about these number changes (they were made public for the first time in October), they are nonetheless provided here.
In 2023, the TSP‘s and other employer-sponsored plans’ voluntary deferral limits will be $22,500, and the catch-up amount for anyone 50 and older (including those who turn 50 in 2023) will rise to $7,500.
In 2023, IRA contributions are limited to $6,500 plus an additional $1,000 for those 50 or older. Inflation-based adjustments are not made to the catch-up amount for IRAs.
Traditional IRA contributions are tax-deductible up to a certain income cap, which for 2023 is as follows:
Single filing status
You qualify for the maximum deduction if your yearly salary is less than $73,000.
Those with annual incomes between $73,000 and $83,000 are eligible for a reduction of some of their tax liability.
You cannot claim any deductions if your annual income is over $83,000.
If both spouses participate in a workplace retirement plan, they can file jointly.
If your annual income is under $116,000, you are eligible for the entire deduction.
If your annual income is between $116,000 and $136,000, you may be eligible to deduct some of your taxes.
If your income is beyond $136,000, you cannot take a tax break.
They can file jointly if a spouse is not enrolled in a workplace retirement plan.
If your annual income is under $218,000, you are eligible for the entire deduction.
You may be eligible for a deduction if your annual income is between $218,000 and $228,000.
You cannot take a tax deduction if your annual income is over $228,000.
You can only put money into a Roth IRA if your annual salary is reasonable.
Single filing status
You can contribute the entire amount if your household’s annual income is less than $138,000.
If your annual income falls between $138,000 and $153,000, you may contribute a portion of your earnings.
You can only contribute if your annual income is, at most, $153,000.
Joint filings Status
You can make the maximum contribution if your annual income is less than $218,000.
A partial contribution is permitted when annual income is between $218,000 and $228,000.
Contributions are not permitted if income exceeds $228,000
You can make Non-tax-deductible contributions to a regular IRA regardless of your income level.
How much more significant are these numbers now that inflation has been considered? The cap for single people was set at $25,000 in 1987 when IRA contributions could no longer be written off as tax deductions. The cap for this year is $73,000. This year, the limit is $73,000. Over history, the value of one dollar has slowly diminished relative to other currencies. Since this is the case, we must take precautions while withdrawing money from our 401(k)s and IRAs. We could begin with a lower withdrawal rate and adjust our TSP withdrawals annually to account for inflation. Fortunately, CSRS, FERS, and Social Security all have automatic cost-of-living adjustments.
Do you realize
Your decision to purchase a TSP life annuity is final if you do so. You must stick with your buying choice, even if circumstances change. As a result, it’s not surprising that people prefer monthly payments (which can be adjusted) to life annuities.
Contact Information:
Email: [email protected]
Phone: 9143022300
Bio:
My name is Kevin Wirth and I have worked in the financial services industry for many years and I specialize in life insurance and retirement planning for individuals and small business owners, with a specialty in working with Federal Employees. I am also AHIP certified to work with individuals on their Medicare planning. You can contact me by e-mail or phone. I look forward to the opportunity of working with you on these most relevant areas of financial [email protected] 914-302-2300
