IRA Contributions-Updates and How to Use Them to Your Advantage

There is still time to contribute to your IRA for 2022. Previous year contributions can be made until the tax deadline, which is April 18th, 2023. Why is this beneficial? Let's say you are doing you tax returns and find that you actually owe the government money this year. You can still contribute to your Traditional IRA to reduce the amount owed, or even benefit from a refund. You won't receive a tax benefit, but you can still contribute to your ROTH until that deadline as well. If you are under age 50, your maximum contribution for 2022 is $6,000, for those 50 and over you can go up to $7,000. Even if you haven't opened an account yet, it's not too late to start now and contribute for 2022. Give us a call and we can get you setup to start investing and saving today.

With the passage of the SECURE Act 2.0, those limits will increase in 2023, meaning someone under 50 can contribute up to $6,500, and 50 and over can now contribute $7,500 annually. This will allow you build your IRA quicker than before. The age for RMD's (Required Minimum Distributions) is also increased by the bill, going from 72 to 73 this year. In 2033, the RMD age will increase again, from 73 to 75. Some other key provisions in the new bill:

• Employees who have a Roth 401(k) won't have to take RMDs from the account starting in 2024.

• Beginning in 2024, employers have the option to match student loan payments with a contribution to the employee's retirement plan account. The goal is to help workers who are burdened by student loans and can't afford to make a contribution to their retirement plan by ensuring that they are accumulating some retirement savings even as they pay down their loan.

• Employers will also have the option to allow employees to create "rainy-day funds" in their retirement plan. Individuals would then be able withdraw up to $1,000 from the plan penalty- and tax-free for emergencies. The provision addresses a concern that spiked during the pandemic, when employers saw a big increase in the number of employees who were tapping their retirement accounts to cover unexpected expenses.

• Victims of domestic abuse can withdraw up to $10,000 penalty-free from their retirement plan account.

• Individuals can withdraw up to $22,000 from an employer-sponsored plan or an IRA for federally declared disasters.

• Individuals can roll up to $35,000 from a 529 to a Roth IRA in the name of the student beneficiary. The 529 account must have been in existence for at least 15 years. That provisions becomes effective in 2024.

• Long-term part-time workers will become eligible for their company's retirement plan after two consecutive years with at least 500 hours of service. Current law requires three years of service.

• The creation of a "retirement savings lost and found" national database that will help individuals find their benefits if they changed jobs, or if the company they worked for moved, changed its name or merged with a different company.