Social Security announces it’s biggest COLA increase in 41 years!
Last week Social Security stole the show with it’s announcement of an 8.7% Cost of Living Adjustment increase.
There was speculation for weeks leading up to the announcements that the adjustment would be above 8%. The last adjustment that came close was in 1981 at 11.2%.
The updated payment amount will begin in January of 2023 unless you are receiving Supplemental Security Income which will begin December 30th.
If you want to find out about your new benefit amount, log into your “my social security” account and you can get your Social Security COLA notice which will be available in early December.
Of note, keep an eye on the tax consequences. This increase could push some seniors into income ranges that make Social Security benefits taxable.
New 401k and IRA increases:
The new 401k Limit has increased to $22,500 and IRA limits have increased to $6,500. If you are over 50 the increase is up to $30,000 in 401ks.
In addition, deductibility for IRA phase outs have changed to
- between $73,000 and $83,000 for single filers
- between $116,000 ans $136,000 for Married filing jointly
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
The Income phase out range for those making Roth IRA contributions has also changed.
- between $138,000 and $153,000 for singles and heads of household,
- between $218,000 and $228,000 for married couples filing jointly
- for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000. In additional the tax rates have changed.
Finally, the Tax Brackets for 2023 have been adjusted for inflation and the standard deduction has increased to $27,700. Be sure to check your status and brackets for the new year!
For More details see the IRS website:
1. https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500
2. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023
Call us if you have questions about how this increase could affect your Financial Plan!