It is common to feel anxious about the future regardless of your age. And if you’re approaching retirement, there can be even more uncertainty. With the inflation rate declining (but still high) at 6% year-over-year to February 2023, per the latest CPI data, concern remains warranted.
However, 2023 is shaping up to be an excellent year for those ages 65 and older. Here are five financial silver linings that seniors can take advantage of this year.
Cost of Living Adjustment Increase
The Social Security Administration (SSA) previously announced that a cost of living adjustment (COLA) increase of 8.7% would be instituted this year, the biggest gain since 1981. The increase took effect in December 2022 and was reflected in January 2023 benefit payments. This is great news for seniors, as the COLA helps seniors keep pace with rising costs.
Decrease in Medicare Premiums and Deductibles
The Centers for Medicare & Medicaid Services (CMS) stated that the standard monthly Part B premium for 2023 had been reduced by $5.20. This brings the premium to $164.90, down from $170.10 in 2022.
Required Minimum Distribution Age May Increase
The SECURE 2.0 bill (as part of the Consolidated Appropriation Act of 2023) passed on Dec. 29, per Baker Hostetler, pushing the required minimum distributions (RMD) age for IRAs from 72 to 75 over time. Further, the RMD age rose by one year, to 73, as 2023 began. Note: If you turn 72 in 2023, your RMD is not due until 2024, per Wells Fargo. The last adjustment would be made for the 2033 tax year, increasing the final threshold to 75. This is beneficial because it will give seniors more time to grow their retirement savings without worrying about required distributions.
Increased Retirement Account Contribution Limits
The 401(k) contribution limit increased by $2,000 in 2023, moving from $20,500 to $22,500.
Catch-Up Contributions Available for Seniors
You may be eligible to contribute much more through catch-up contributions if you’re above 50 — or have more than 15 years of service for a 403(b) plan. More than the standard $22,500, you could contribute up to $30,000 this year to your 401(k). By doing so, you can supercharge your retirement savings if you have the extra cash.
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This story has been updated with additional information.