Important Information for Tax Season 2022

Contributed by: Lauren Adams, CFA®, CFP®

As we prepare for tax season, we want to keep you apprised of when you can expect to receive your tax documentation from Raymond James.

2022 Form 1099 Mailing Schedule

• January 31 – Mailing of Form 1099-Q and Retirement Tax Packages.

• February 15 – Mailing of original Form 1099s.

• February 28 – Begin mailing delayed and amended Form 1099s.

• March 15 – Final mailing of any remaining delayed original Form 1099s.

Additional Important Information

Delayed Form 1099s

In an effort to capture delayed data on original Form 1099s, the IRS allows custodians (including Raymond James) to extend the mailing date until March 15, 2023, for clients who hold particular investments or who have had specific taxable events occur. Examples of delayed information include:

• Income reallocation related to mutual funds, real estate investment, unit investment, grantor and royalty trusts, as well as holding company depositary receipts.

• Processing of original issue discount and mortgage-backed bonds.

• Expected cost basis adjustments including, but not limited to, accounts holding certain types of fixed income securities and options.

If you do have a delayed Form 1099, we may be able to generate a preliminary statement for you for informational purposes only, as the form is subject to change.

Amended Form 1099s

Even after delaying your Form 1099, please be aware that adjustments to your Form 1099 are still possible. Raymond James is required by the IRS to produce an amended Form 1099 if notice of such an adjustment is received after the original Form 1099 has been produced. There is no cutoff or deadline for amended Form 1099 statements. The following are some examples of reasons for amended Form 1099s:

• Income reallocation.

• Adjustments to cost basis (due to the Economic Stabilization Act of 2008).

• Changes made by mutual fund companies related to foreign withholding.

• Tax-exempt payments subject to alternative minimum tax.

• Any portion of distributions derived from U.S. Treasury obligations.

What Can You Do?

You should consider talking to your tax professional about whether it makes sense to file an extension with the IRS to give you additional time to file your tax return, particularly if you held any of the aforementioned securities during 2022.

If you receive an amended Form 1099 after you have already filed your tax return, you should consult with your tax professional about the requirements to re-file based on your individual tax circumstances.

You can find additional information here.

And Don’t Forget…

As you complete your taxes for this year, a copy of your tax return is one of the most powerful financial planning information tools we have. Whenever possible, we request that you send a copy of your return to your financial planner, associate financial planner, or client service associate upon filing. Thank you for your assistance in providing this information, which enhances our services to you.

We hope you find this additional information helpful. Please call us if you have any questions or concerns about the upcoming tax season.

Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

A 2022 Snapshot

Contributed by: Angela Palacios, CFP®, AIF®

Diversification

• The S&P 500 ended 2022 negative by 18.11%, while the Bloomberg US Aggregate Bond Index was down 13%, and international investments, as represented by the MSCI EAFE, were negative by 14.45%

• Stocks and bonds both being negative for 12-month returns is exceptionally rare and has only occurred in 2.4% of 12-month rolling periods in the past 45 years.

• Many well-known target data and diversified strategies allocated roughly 60% stocks and 40% bonds down in the 17-18% range for the year. (Source: Morningstar)

Fixed Income

• The Federal Reserve raised interest rates seven times in 2022 to combat inflation.

• Interest rates moved from 0-.25% all the way up to 4.25-4.50%

• This year's sharp increase in rates and, thus, negative performance in bonds has been an anomaly and is unlikely to repeat.

Volatility Driven By

• Russia/Ukraine conflict has lasted far longer than anyone had predicted.

• Inflation is retracing its steps stubbornly slow.

• Interest rate increases.

• China's zero covid policy up until their elections. They then moved from one extreme to the other by relaxing all restrictions following unrest from the population. Now, they are dealing with a wave of Omicron hitting the population.

• Cryptocurrency woes.

Elections and Politics

• Split congress suggests there will be no major legislation this year. Gridlock is usually positive for equity markets, but debt ceiling expansion could cause a standoff, and we may hear rumblings of a government shutdown in the fall. In the past, this has not had a long-term impact for markets.

• Secure Act 2.0 – Check out this blog written by Kali Hassinger for more information. We will also take a few minutes to review the changes at our upcoming investment event.

Interest rates

The biggest story of 2022 has been how drastically the yield curve has shifted. Check out the chart below showing where the yield curve was at the end of 2021 (Dark gray line) and where it finished in November this year (blue line). The shaded area shows the range of the yield curve over the past ten years. Not only is the yield curve no longer upward-sloping, as it is currently inverted, but it also sits near the high end of yields we have seen over the past decade. While this created short-term negative returns for bonds with both short and long duration, yields are again a meaningful part of future projected returns. Bonds continue to deserve a meaningful allocation in most portfolios.

Inflation

Another major headline of the year has been inflation. The Federal Reserve (the Fed) has shifted the yield curve aggressively by raising short-term rates this year in an effort to combat inflation. We are seeing gathering evidence of inflation coming down with improving supply chains and gas prices coming down. This evidence gave the Fed confidence to slow to a 50 bps increase in December as opposed to the string of .75% increases leading up to this past month. The most recent inflation reading came in at 7.1% for December. You can see in the chart below the month-by-month print of CPI throughout 2022 influencing the Fed decisions.

Looking under the hood at what drives inflation numbers, we can see port congestion has also improved, which is a lead indicator of inflation. Remember in early 2022 when I shared a chart showing 100+ ships waiting to get into the Port of Los Angeles and Long Beach? Now, it hovers below ten – bottlenecks are reducing. The chart below shows the relationship between slower delivery times (blue line) equating to higher inflation (gray line) and vice versa, with faster delivery times equating to lower inflation. 

Chart of the Week: Source: BLS, S&P Global, J.P. Morgan Asset Management.

We should see inflationary pressure continue to lessen in the coming months. A reversal of China's zero Covid policy will also start to decrease delivery times of items coming out of China.

Consumer trends are also a leading indicator you can watch, and right now, they are walking a thin line as credit card balances are at all-time highs while savings rates are at all-time lows. This can not continue perpetually, so as consumers slow their spending, we should see inventories build and prices decline as retailers struggle to clear shelves.

As the Fed tries to move toward a target of 2% inflation, risks for the Fed's overtightening are my next worry. Tightening too much could determine if the economy goes into a recession and how deep of a recession. While a mild to moderate recession is likely priced in now, it is important to remain defensive with a well-diversified portfolio.

Housing Affordability and Inflation

With mortgage rates rising, many worry about home affordability and a retreat in home prices. While higher rates do not impact existing mortgages, they will impact new mortgages. People will be less likely to sell their homes as their rates are locked in at such low levels, meaning there will be a lack of homes on the market for new household formation. Typically, when the U.S. falls into recession, housing drops with it. Most of us remember home values falling swiftly and significantly during the Great Recession. A drop like that is unlikely to occur this time, as there are many factors that are different now. Mainly, there is not a glut of homes as there was in 2008-09. Demand for homes is still much higher than the supply due to the lack of building over the past decade, so while prices may come down from current levels, they will not be by much.

2023 should bring with it continued inflation relief and the potential for recession. We continue to remain cautious by holding a shortened duration in our bond portfolios and holding some extra cash for a time when the technicals of the equity markets are pointing toward downside exhaustion and healthy bottoming activity. We continue to rebalance as needed, watch our trusted indicators, and maintain our process over trying to predict what is to come. We know investing in a year like 2022 can be challenging to stay disciplined through, and we are humbled and honored by the trust you place in us to guide you through these times. 

Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.

Any opinions are those of the Angela Palacios, CFP®, AIF® and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Diversification and asset allocation do not ensure a profit or protect against a loss. Dividends are not guaranteed and must be authorized by the company's board of directors. Special Purpose Acquisition Companies may not be suitable for all investors. Investors should be familiar with the unique characteristics, risks and return potential of SPACs, including the risk that the acquisition may not occur or that the customer's investment may decline in value even if the acquisition is completed. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not a guarantee or a predictor of future results. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Your 1099 Overview

Contributed by: Nick Defenthaler, CFP®, RICP®

Tax season is in full swing, and 1099s are being developed and distributed by Raymond James and other brokerage firms. The two most common accounts clients own are retirement accounts (Roth IRAs, Traditional IRAs, SEP-IRAs, etc.) or after-tax investment/brokerage accounts (Joint brokerage account, individual brokerage account, trust brokerage account, etc.). Because retirement accounts and after-tax accounts are vastly different from a tax perspective, the 1099s that are generated will be much different as well. Let’s review the differences.

Retirement Accounts (Traditional IRAs, Roth IRAs, SEP-IRAs, 401k, 403b, etc.)

Retirement accounts produce what is known as a 1099-R. Yes, you guessed it – the “R” stands for retirement account! Because retirement accounts are tax-deferred vehicles, the IRS only cares about how much was withdrawn from the account and if there was any tax withheld on those distributions (the 1099-R is also accompanied by form 5498, which also shows any contributions to the retirement account). Because of the simplicity and what is captured on this tax form, I commonly refer to a client’s 1099-R as their “retirement account’s W2”. Given the tax-deferred nature of retirement accounts, portfolio income such as dividends, interest, and capital gains are completely irrelevant from a tax reporting standpoint. These income sources also do not play a role within the 1099-R, so far less accounting goes into producing the 1099-R. This means they are released early in the year – typically in late January/early February (around the same time most W2s are produced for those still working). For those over 70 ½ that have chosen to facilitate gifts to charity through their IRA by utilizing the Qualified Charitable Distribution or ‘QCD’ strategy (click here to learn more about QCDs), Raymond James now captures these gifts on the 1099-R to ensure your tax preparer is aware and factors them into your tax return.

After-Tax Investment/Brokerage Accounts (Trust accounts, joint accounts, individual accounts, etc.)

After-tax investment or ‘brokerage accounts’ are very different from retirement accounts regarding tax reporting. Because these accounts are funded with after-tax dollars and not held in a retirement account, there is no tax deferral. This means that income sources such as dividends, interest, and capital gains are taxable to clients each year – the 1099 produced for these accounts captures this data so your tax preparer can accurately complete your tax return each year. Within the 1099 summary, there are three common sections:

• 1099-Div: Reports dividends paid throughout the year

• 1099-Int: Reports interest paid throughout the year

• 1099-B: Reports capital gains or losses generated throughout the year

Unlike retirement accounts that are tax-deferred, dividends, interest, and capital gains/losses play a significant role within the 1099 because they are reportable on your tax return each year. Therefore, a significant amount of accounting from the various investments within your account is required to determine these figures captured on your 1099. Because taxes are not withheld in these accounts if distributions ever occur, withdrawals are not captured on these 1099s as they would be on a 1099-R. Given the extensive accounting that arises to ensure errors are not made on reportable income, the earliest these 1099s become available is typically mid-February. That said, it is quite common for many 1099s to be distributed closer to mid-March. Because of this, I recommend consulting with your tax professional to see if filing a tax extension is appropriate for your situation.

As you can see, there are important differences between these different tax reporting documents. Having a better understanding of each will make your upcoming tax season more manageable. If our team can be of help with your tax forms or any other areas, please feel free to reach out!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Financial Resolutions to Consider for 2023

Contributed by: Kelsey Arvai, MBA

As the year comes to a close, it is time to start thinking about the New Year and starting it off on the right foot. What better way to accomplish this than by improving your financial health in 2023? January is Financial Wellness Month and Wealth Mentality Month – which serves as a reminder to get our finances in order and plan out our financial strategies. It is also the perfect opportunity to check in with your Financial Advisor to ensure you are financially prepared both in the short and long term.

While planning your financial resolutions, remember to be specific about what you want and why. The key to success is being clear about your priorities and choosing a particular goal. Make sure your goals are attainable, write them down, and post them somewhere where you will be reminded of them often. You can ensure accountability by creating calendar reminders to check in on your goals throughout the year.  

For additional resources on Financial Planning tips going into the New Year, check out Sandy Adams' blog from last year. I have also provided some additional ideas below from a blog I wrote last year:  

Automate Savings & Debt Reduction

Establishing and maintaining a positive cash flow is a top-tier priority for your financial health. Automation is key to efficiency and effectiveness while working towards your financial goals. Prioritizing your savings contribution through automation helps hedge against the temptation to spend the funds elsewhere. Utilizing automatic payments for your credit card could help your credit score if the payment happens before your due date. After establishing an emergency fund through your automated savings, you might consider directing excess cash to your retirement and health savings plans.

Max Out Your 401(k) & Health Savings Account (HSA)

The beginning of the year is a great time to review your 401(k) and HSA contributions to ensure that you are maximizing your benefits and taking advantage of increased deferral limits for 2023. 401(k), 403(b), and most 457 plan limits are now up to $22,500 for elective employee deferral. The catch-up contribution limit for employees aged 50 allows for an additional savings of $7,500. Similarly, HSA contribution limits are up to $3,850 for individuals and $7,750 for family coverage, with an additional $1,000 for employees 55 for older.

It is estimated that couples retiring today will face $200,000-$300,000 of out-of-pocket medical expenses over their retirement years. Since HSAs are not "use-it-or-lose-it" accounts, and they can be spent on any expense without penalty after 65, it is advantageous to fully fund these accounts every year.

Plan for Charitable Giving

Most people wait until December to give, but we recommend not being in such a rush that you wait until the end-of-the-year deadline and lose sight of your charitable goal. The beginning of the year is a great time to develop a plan for your year ahead. Consider reading the following blog posts to help you get started by picking a charity that is fulfilling for you.

How to Pick a Charity…During a Pandemic Part 1: Important Documents

How to Pick a Charity…During a Pandemic Part 2: Commitment to the Mission

How to Pick a Charity…During a Pandemic Part 3: Resources

Invest in Your Emotional and Physical Well-Being

As you take stock of your financial health this year, carving out time for your physical health is equally paramount. There is a connection between health and wealth; each should be analyzed and reviewed professionally, at least annually.

Reach Out to Your Financial Advisor 

Working with your advisor, at least annually, can provide support to keep you on track while determining and working towards financial goals.

On behalf of all of us at The Center, we wish you a happy and healthy 2023!

Kelsey Arvai, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Kelsey Arvai, MBA and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

SECURE ACT 2.0 Is FINALLY Happening!

Contributed by: Kali Hassinger, CFP®, CSRIC™

For the last several months, we have been monitoring the possibility of a "Secure Act 2.0" being passed into legislation. The initial SECURE Act (which stands for Setting Every Community Up for Retirement) was passed in late 2019, and had far-reaching effects on Required Minimum Distributions, inherited retirement accounts, and expanded the ability to contribute to IRAs.

Throughout the year, there have been talks about additional legislation through the Secure Act 2.0 to further expand access to retirement savings for individuals, small-business employees, employees with student loans, and part-time workers. 

On Thursday, December 22nd, Secure Act 2.0 was pushed through as part of the $1.7 billion 2023 omnibus appropriations bill (which is a brief 4,000+ page read). Some of the key provisions contained in the bill include:

• Higher retirement plan catch-up limits beginning at age 60 and increasing each year of age. This will likely go into effect in 2024.

• Increasing the Required Minimum Distribution age to 73 in 2023, and eventually it will be increased to age 75 over several years.

• Requiring employers to auto-enroll new employees into their current 401(k) or 403(b) plans with an automatic contribution increase each year.

• The tax penalty for missing a Required Minimum Distribution will be reduced from 50% to 25%, with the future ability to reduce the penalty to 10% if the miss is corrected in a timely manner.

• The establishment of a “starter” 401(k) plan or 403(b) plan for employers that do not currently offer retirement plans.

• A 100% tax credit for employer matches in newly established employer retirement plans.

• Allowing student loan repayments to be treated as retirement plan contributions for company match purposes.

• Establishment of a retirement savings Lost and Found for those who have lost track of old retirement plans.

• A pension linked emergency savings provision.  These accounts must be held in cash and contributions (up to a maximum balance of $2,500) must be treated as retirement plan contributions for matching purposes. Distributions would be tax free.

• Emergency withdrawals up to $1,000 every 3 years, or until the previous withdrawal has been paid back, will be allowed from retirement plans.

• Part-time employees with 2 years of 500+ hours will qualify for retirement plan participation

• The ability to transfer some 529 funds to a Roth IRA in the 529 beneficiary’s name. The amount that can be transferred is subject to Roth IRA annual contribution limits with the lifetime transfer amount of $35,000. Roth IRA contribution income limits do not apply.  The 529 needs to have been established for 15 years.

Many of these updates will slowly go into effect over time, and we are continuing to actively monitor and research Secure Act 2.0 as details continue to emerge. We will provide additional information as it is available, but if you have any questions about how this could affect you, please contact your Financial Planner. We are always happy to help!

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The information contained in this letter does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP®, CSRIC™, and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

Blogs You May Have Missed (And Are Worth the Read!)

Contributed by: Center for Financial Planning, Inc.®

As we mentioned last week, Center team members have written an astounding 59 blogs in 2022! With that much content, it’s easy to miss some of our posts here and there. So, take a look at the list below for some of our Most Underrated Blogs of the Year. There just may be one that peaks your interest!

1. Harvesting Losses in Volatile Markets

Kali Hassinger, CFP®, CSRIC™ discusses several ways you can carry out a successful loss harvesting strategy during inevitable periods of market volatility.

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2. What Happens to my Social Security Benefit If I Retire Early?

Are you considering an early retirement? Kali Hassinger, CFP®, CSRIC™ explains how Social Security is one topic you'll want to check on before making any final decisions.

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3. How to Find the Right Retirement Income Figure for You

When it comes to your retirement income, you don't want to guess. Sandy Adams, CFP® shows you where you should start to develop the most accurate number for you.

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4. Why Retirement Planning is Like Climbing Mount Everest

Nick Defenthaler, CFP®, RICP® shares that our goal as your advisor is to help guide you on your journey - both up and down the mountain of retirement!

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5. New Guidelines May Help Retirees Retain More Savings

Josh Bitel, CFP® shares new RMD tables that now reflect longer life expectancies, which means a reduction in yearly required distributions.

The Results Are In…The Top Five Blogs of 2022

Contributed by: Center for Financial Planning, Inc.®

Over the course of 2022, Center team members have written an astounding 59 blogs on topics including retirement planning, market volatility, eldercare, and investment planning - just to name a few. The results are in, and here are our Five Most Popular Blogs to close out the year. Check out our list below to see how many you have read!

1. Is My Pension Subject to Michigan Income Tax?

In 2012, Michigan joined the majority of states in taxing pension and retirement account income. Nick Defenthaler, CFP®, RICP® reviews how these taxes can play a role in one's overall retirement income planning strategy.

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2. The “10-Year Rule” Update You Need to Know About

One of the details of the SECURE Act that many of us call the "10-year rule" may be changing slightly. Jeanette LoPiccolo, CFP® shares what you need to know.

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3. Strategies for Retirees: Understanding Your Tax Bracket

Michael Brocavich, CFP® describes the two simple strategies that could potentially help reduce the amount of tax due in retirement.

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4. The Basics of Series I Savings Bonds

With the inflation increase, Series I savings bonds have become an attractive investment. Kelsey Arvai, MBA shares what to consider before adding them to your portfolio.

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5. What is Retirees’ Biggest Fear?

It's not the fear of running out of money. Not the stock market either. Nor loneliness. Sandy Adams, CFP® tells you what it truly is.

New Retirement Plan Contribution and Eligibility Limits for 2023

Contributed by: Robert Ingram, CFP®

If you are planning your retirement savings goals for the New Year, you may be surprised by how much you can contribute to your retirement accounts in 2023. The IRS has increased the annual contribution limits for employer retirement plans and IRA accounts, as well as the eligibility limits for some contributions. With inflation in 2022 at a 40-year high, many of these increases are also some of the largest in decades. Here are some adjustments worth noting for 2023.

Employe retirement plan contribution limits (401k, 403b, most 457 plans, and Thrift Saving):

• $22,500 annual employee elective deferral contribution limit (increased from $20,500 in 2022)

• $7,500 extra "catch-up" contribution if over the age of 50 (increased from $6,500 in 2022)

• Total amount that can be contributed to a defined contribution plan, including all contribution types (e.g., employee deferrals, employer matching, and profit sharing), is $66,000 or $73,500 if over the age of 50 (increased from $61,000 or $67,500 for age 50+ in 2022)

Traditional, Roth, SIMPLE IRA contribution limits:

Traditional and Roth IRA

• $6,500 annual contribution limit (increased from $6,000 in 2022)

• $1,000 "catch-up" contribution if over the age of 50 remains the same

Note: The annual limit applies to any combination of Traditional IRA and Roth IRA contributions. (i.e., You would not be able to contribute up the maximum to a Traditional IRA and up the maximum to a Roth IRA.)

SIMPLE IRA

• $15,500 annual contribution limit (increased from $14,000 in 2022)

• $3,500 "catch-up" contribution if over the age of 50 (increased from $3,000 in 2022)

Traditional IRA deductibility (income limits):

Contributions to a Traditional IRA may be tax deductible depending on your tax filing status, whether a retirement plan covers you (or your spouse) through an employer, and your Modified Adjusted Gross Income (MAGI). The amount of a Traditional IRA contribution that is deductible is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For example,

Single

• Covered under a plan

  • Partial deduction phase-out begins at $73,000 up to $83,000 (then above this no deduction) compared to 2022 (phase-out: $68,000 to $78,000)

Married filing jointly

• Spouse contributing to the IRA is covered under a plan

  • Phase-out begins at $116,000 to $136,000 compared to 2022 (phase-out: $109,000 to $129,000)

• Spouse contributing is not covered by a plan, but other spouse is covered under plan

  • Phase-out begins at $218,000 to $228,000 compared to 2022 (phase-out: $204,000 to $214,000)

Roth IRA contribution (income limits):

Just like making deductible contributions to a Traditional IRA, being eligible to contribute to a Roth IRA depends on your tax filing status and income. Your allowable contribution is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For 2023 the limits are as follows:

Single

• Partial contribution phase-out begins at $138,000 to $153,000 compared to 2022 (phase-out: $129,000 to $144,000)

Married filing jointly

• Phase-out begins at $198,000 to $208,000 compared to 2020 (phase-out: $196,000 to $206,000)

You can contribute up to the maximum if your MAGI is below the phase-out floor. Above the phase-out ceiling, you are ineligible for any partial contribution.

Eligibility for contributions to retirement accounts like Roth IRA accounts also requires you to have earned income. If you have no earned income or your total MAGI makes you ineligible for regular annual Roth IRA contributions, using different Roth IRA Conversion strategies could be a way to move money into a Roth in some situations.

As we start 2023, keep these updated figures on your radar when reviewing your retirement savings opportunities and updating your financial plan. As always, if you have any questions about these changes, don't hesitate to contact our team!

Have a happy and healthy holiday season and a great start to the New Year!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

Any opinions are those of Bob Ingram, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

An IRS Penalty Waiver to the "10-Year Rule" for 2021 and 2022

Contributed by: Jeanette LoPiccolo, CFP®

In our blog ‘The “10-year Rule” Update You Need to Know About’, we shared that, for some IRA beneficiaries, RMDs will be due annually, and the entire account must be withdrawn by the end of the 10th year.

We received some good news! The IRS has waived the 50% penalty for beneficiaries subject to the 10-year rule under the SECURE Act who have not taken 2021 or 2022 required minimum distributions (RMDs) from an inherited IRA (Notice 2022-53). This regulation was issued on October 7, 2022, and impacts only Beneficiary IRA accounts, also called Inherited IRA accounts. It does not include beneficiary Roth accounts. 

We will continue to notify our impacted clients of their RMDs in 2023 and onwards. Our help with identifying and calculating RMDs is one of the many great benefits of working with The Center. If you have any questions about how the rule could affect you or your family, we are always here to help!

Jeanette LoPiccolo, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She is a 2018 Raymond James Outstanding Branch Professional, one of three recognized nationwide.

The RJFS Outstanding Branch Professional Award is designed to recognize support professionals in RJFS branches who contribute to the success of their advisors and teams. Each year, three winners are selected and recognized during this year's National Conference for Professional Development. To be considered for this award, Branch Professionals must have been affiliated with Raymond James for at least one year and could not have won the award in the past.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Holding onto Cash? Here Are a Few Options to Get Some Interest!

Contributed by: Kali Hassinger, CFP®, CSRIC™

As Financial Planners, we often talk to clients about the importance of maintaining a cash reserve for emergencies or unforeseen expenses. In past years, the return on cash has been minimal, if not close to nothing, but throughout 2022, we have seen interest rates continually rise. This presents the opportunity to get some interest on cash! There are several options available, so which is most appropriate for you? Where to put cash savings, as with other investments, depends on your time horizon and goals.  

Money Market Accounts

Money Market accounts are offered through a bank or credit union, often offering greater interest than a typical savings account. The rates paid by a money market are based on current interest rates, and the rate you receive can adjust periodically. These rates are often more attractive than savings, but transaction limits and high minimum account balance requirements can exist. Rates can also be tiered, meaning the higher your balance, the higher the interest paid. These accounts are easily accessible, sometimes offering check-writing abilities, and insured through the FDIC up to $250,000. 

CDs

Short Term Certificates of Deposit, or CDs, purchased through a bank or credit union, are also FDIC insured but allow less liquidity than Money Market accounts. CDs earn a fixed rate over a pre-determined amount of time, ranging from a few months to several years. Accessing money before the maturity timeline can result in penalties, so be sure you will not need to access the funds before the required period.

Money Market Mutual Funds 

Money Market Funds hold a basket of securities that can generate gains and losses that will be passed onto shareholders. The investments held, however, are usually considered short-term and low-risk, such as U.S. Treasury bonds and high-quality corporate bonds. Unlike the Money Market accounts discussed above, the FDIC does not insure these funds. 

They are similar to Money Market accounts, however, in that interest rates fluctuate. Although there is an inherent risk with these funds, shareholders should not experience excessive price fluctuation, which can be held for short periods. Investors must trade into and out of these funds, so there can be a lag of a few days in order to access the account balance. 

Treasury Securities and Bonds

Treasury-backed securities have started to pay attractive rates as the Fed has continually raised interest rates throughout the year. These are backed by the U.S. government, which is another way of saying that they are generally considered some of the safest investments available. Treasury Bills are short-term securities with several term options ranging from four weeks to a year. Like CDs, you should only invest funds that you are confident you will not need to access before the maturity date, but these can be resold on the market if necessary. 

I-Bonds, sold through Treasury Direct, have become attractive for the first time in many years. These bonds must be purchased through TreasuryDirect.gov, and the amount an individual can purchase is limited to $10,000 per year (with additional allowances if you purchase paper I-Bonds). These must be held for a year, but if you cash them in earlier than five years, you lose three months of interest. 

If you are still determining which option is best for you or if you are interested in investing cash, be sure to reach out to your planner!

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Individual investor's results will vary. Past performance does not guarantee future results. Investments mentioned may not be suitable for all investors.