2023 has been an extraordinarily tumultuous year. While the Fed has paused interest rate increases, the consensus amongst investment professionals is that we are closer to the end of the interest rate hike cycle. The world is dealing with two wars; Russia/Ukraine and Israel/Hamas and tensions have been rising with China, which will hopefully be moving in a better direction as a result of the Biden-Xi meetings. Despite the world turmoil, the US economy has been very resilient, and our diversified portfolios have increased so far year to date.
As we approach year-end and move into 2024, below is some information for you to consider in planning for next year:
- 2023 Gifting needs to be completed by December 31. The amount that can be gifted under the annual exclusion is $17,000 per donee (this will increase to $18,000 in 2024).
- 401(k), 403(b), Thrift Savings Plan, and most 457 plans maximum contributions will increase from $22,500 to $23,000, and the catch-up contribution for anyone 50-and-over continues at $7,500, putting the maximum total contribution at $30,500 for 2024.
- SIMPLE IRA maximum contribution levels will increase from $15,500 to $16,000 in 2024 and the catch-up contribution for anyone 50-and-over remains at $3,500 in 2024.
- Health Savings Account contributions are increasing from $3,850 for individuals and $7,750 for families to $4,150 and $8,300 in 2024. The catch-up for anyone 50-and-over remains at $1,000 for 2024.
- IRA contributions must be made by April 15th, 2024 (for 2023). Contribution limits are increasing from $6,500 to $7,000 in 2024, with a $1,000 catch-up contribution for anyone 50-and-over.
- Simplified Employee Pension (aka SEP-IRA) contributions can be made up until the filing date of your tax return, including extensions. The contribution maximum for 2024 is capped at $69,000 ($66,000 for 2023).
- Unused 529 Plans – In 2024, funds can be rolled over into a Roth IRA up to a lifetime limit of $35,000. The account has to have been held for 15 years to be eligible. You can also transfer the funds to another 529 plan beneficiary.
- Required Minimum Distributions – If you turn 73 in 2023 or 2024 you are required to begin your annual distributions.
- Beneficiary IRA’s – We are awaiting clarification in 2024 to determine if there are annual withdrawals required in the 10-year window. Penalties have been waived for 2022 and 2023.
- Now is a good time to review your cash reserves to make sure you can handle unexpected expenses, shorter-term needs, and potential employment changes.
- Prepare to review your estate documents early next year. Make sure nothing has changed that warrants an update and review your beneficiaries to make sure they are in good order.
- Run a credit report to make sure there is no unexpected activity. Consider getting some identity protection and be vigilant about changing passwords periodically.
- Consider looking into identity protection coverage, as cybercriminal activity is on the rise.
- Revisit your financial planning goals – It’s always good to start the year implementing changes to try to maximize your shorter and longer-term goals.
Uncertainty and continued economic and geopolitical risks only serve to reinforce our investment strategy of full diversification, managing risk, and rebalancing. Please keep us apprised of any changes. I, along with Jason, Sara, Dale, and Danielle wish everyone a great holiday season. We are looking forward to serving you in 2024 and thank you for your continued support and trust in us.
Sources:
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024
https://www.cnbc.com/2023/11/07/central-banks-look-to-have-hit-peak-rates-heres-how-markets-think-theyll-come-down.html
https://www.agf.com/us/insights/outlook/how-high-for-how-long.jsp
https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions
https://www.fidelity.com/learning-center/personal-finance/529-rollover-to-roth
