Market Outlook: Recession?
Very much like the scene above of Bass Light, the financial outlook for 2023 is chilly. Although economists and market forecasters are seeing a decrease in inflation, the overwhelming majority of analysts are calling for a recession by mid-2023. Specifically, many expect there to be a "light" recession that will also be comparatively brief. None of us should be surprised by these developments in the markets and economy as they continue to settle down from the whiplash movements of the COVID-induced pullback and then the startling recovery. What goes up must come down, yet what goes down must also come up. Such is the nature of investing.
This, as always, is a great time to be a long-term investor. Stay the course (don't react to the market turmoil), update your goals annually, and meet with your financial advisor regularly. In time, spring and summer will arrive.
2023 Updates
With each new year, we have to update or refine our financial plans. Part of that is adjusting to new limits allowed by the IRS. Here are the biggest changes in store for next year:
Positive Changes
• Employer retirement accounts (401(k), 403(b) and TSP) increased to:
o $22,500 (a $2,000 increase).
o The catch-up for 50 or older Clients is an additional $7,500 (an increase of $1,000) for a total of $30,000
• IRAs (Traditional and Roth), increased to $6,500 (a $500 increase)
o The catch-up for 50 or older remains $1,000
• Gift Tax annual exclusion will be $17,000 (a $1,000 increase)
• The tax brackets are increasing, which results in overall lower taxes for the same amount of income earned next year
• The Married Filing Jointly standard deduction will increase to $27,700 and the Single taxpayer will have $13,850 as the standard deduction
Not as Positive a Change
• The Social Security wage cap increases to $160,200, which is up by $13,200 from this year
No Change
• The threshold for both Medicare (0.9%) and Net Investment Income Tax (3.8%) remains at $250,000 for MFJ and $200,000 for Single taxpayers
• The AGI phaseout for the American Opportunity Tax Credit and the Lifetime Learning Credit remains $160,000-$180,000
Good News
You have more control over your taxes than you may realize. With detailed, thoughtful planning, you can both manage your taxes and prepare for future needs. Let's meet and talk about your 2023 tax management strategy.
SECURE ACT 2.0
I do not suppose that anyone’s idea of preparing for Christmas is to pass a 1+ trillion-dollar Appropriation Bill. However, that is in fact what Congress did on 23 December 2022. It was previously known as SECURE Act 2.0, and that is still how it is being commonly referred to, so I will do the same to avoid confusion.
There are significant and detailed changes on many fronts, but the most helpful thing for Clients is to understand the “top line” points for now. The actual impact, if any, will be woven into your personalized plan and advice.
• Required Minimum Distribution (RMD): The age to start taking RMDs increases to age 73 in 2023 and to 75 in 2033.
• Roth RMD: Roth funds in a qualified employer plan are no longer subject to RMD.
• IRA Inheritance: If a spouse inherits an IRA, they can elect to adopt the deceased spouse’s age for RMD purposes when it is beneficial to do so.
• Contributions Indexed: Catch-up contributions to an IRA are now indexed for inflation.
• Employer Contributions: Employee may elect that employer contributions be treated as Roth money for a Roth (401(k), Roth 403(b), and SEP type accounts.
• “Percent of Contribution as Roth”: A new field will be added to the Contributions tab in the Basic Fact Finder along with the Account Detail page in the Client Site called, “Percent of Contributions as Roth” with a value of 0% to 100%. This field will only be available for account types mentioned above.
• Catch-up Contributions at Age 50: Catch-up contributions starting at age 50 must be treated as Roth contributions for high-income employees (those earning over $145,000 in the prior year adjusted for inflation).
• Catch-up Contributions at Ages 60-63: Special catch-up contributions for employees aged 60-63 starting in 2025: The greater of $10,000 (indexed for inflation starting in 2026) or 150% of the “standard catch-up contribution” for 2024.
• Simplified Employee Pension (SEP) IRAs: The ability to contribute to and grow Roth funds has been added to SEP IRAs. Starting in 2024
• Student loan debt. Starting in 2024, employers will be able to "match" employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.
• 529 Plans. After 15 years, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. Rollovers cannot exceed the aggregate before the 5-year period ending on the date of the distribution. The rollover is treated as a contribution towards the annual Roth IRA contribution limit.
The ink is barely dry on the new law, so we need to wait for the IRS to write the regulations to better understand all the details. It is also important to realize that some of these changes will take place over years, and in some cases employers will have their own timelines for implementation.
Do you have questions about the SECURE Act or your financial plan? There are always multiple layers to all new tax laws so please schedule a meeting and we will discuss how this affects your financial future.
Laissez les bons temps rouler
Mary's Recipe Corner
Swedish Meatballs
I have been a vegetarian most of my life, but when I was little this was one of my favorite dinners. Bill also loves this recipe and has requested it for several birthday meals. They are best served over mashed potatoes. I rarely miss meat, but I must admit to salivating a bit as I write out this recipe. 😉
• 1 cup breadcrumbs
• 1 cup milk
• 1/4 cup chopped onion
• 1 lb ground beef
• 1 egg, slightly beaten
• 1/2 tsp nutmeg
• 1-1/2 tsp salt
• 1/8 tsp pepper
• 2 TBSP butter
• 2 TBSP flour
• 1 cup hot water
• 1 beef bouillon cube
• 1/2 cup milk
• 1/2 cup half and half
Soak bread in milk. Let sit for a few minutes. Add onion, beef, egg, nutmeg, salt, and pepper. Roll into balls. Melt butter in frying pan and brown the meatballs, gently rolling them so all sides brown. Remove meatballs from the pan. Add the flour to the pan and gradually whisk in the hot water. Then add the bouillon cube, milk, and 1/2 and 1/2. Once the heated mixture has a gravy consistency, add the meatballs back into the pan. Cover, and simmer 15 minutes.
Blessings and bon appétit!
Mary
[email protected]
For Art's Sake
If you grow up in New Orleans you learn to appreciate art (and food and music and parades, etc.), so it's appropriate to share a bit of art with our readers.
The work below is by artist Michael Hunt of New Orleans. He began his art career in a most humble manner. While still a student at LSU he created a work of art paying tribute to the university. With meager startup money he had saved since childhood, he printed a few hundred posters. Using a shopping cart, he wheeled around the school before and after football games selling rolled copies. That first poster sold more than 70,000 copies within weeks. To this day it remains one of the most successful collegiate posters of all time.
Michael and I were friends in grade school and high school. It is wonderful to see him achieve such great success. See more HERE.
