“If you don't know where you're going, any road will take you there.”-Lewis Carroll, Alice in Wonderland
If there is one thing 2022 has taught us, it is that being financially prepared is a critical ingredient in securing one’s financial future. While some things are simply out of our control such as historic inflation, high interest rates and a decline in the stock and bond markets, we can still set positive goals for the coming year by focusing on things we can control.
2023 offers a number of new opportunities for savers and investors. Whether your priorities involve retirement, growing wealth, securing your family’s financial legacy or just setting aside time to enjoy life, it starts with setting achievable goals and benchmarks. Hitting these goals may not happen overnight, but they should not be discarded as the year progresses. Break them down into goals that are measurable and accomplishable. For example, rather than simply saying “I want to save more for retirement,” a more tangible goal might be “I am going to max out my employer match 401(k) contributions.” Whatever your goal, it is important that it fits into your larger, long-term plan.
As we begin 2023, we thought we would suggest some possible resolutions and example goals to pursue in the coming year:
1. Boost retirement savings in 2023
If you’re looking to increase your retirement savings, there is some good news for 2023. Thanks to SECURE Act 2.0 recently passed by Congress, there are now higher contribution limits for your 401(k) and individual retirement account. In 2023, the employee deferral limit is $22,500, up from $20,500, and catch-up deposits for savers age 50 and older jump to $7,500, up from $6,500. Many of these changes are tied to inflation.
The contribution limits have also increased for IRAs, allowing you to save up to $6,500 for 2023, up from $6,000 in 2022. The catch-up deposit remains at $1,000 for 2023. Increasing your contribution to benefit your retirement goal is always a good idea. The changes for 2023 are designed to make this more possible.
The 2023 inflation adjustments also mean more investors may qualify for Roth IRA contributions. The adjusted gross income phaseout range rises to between $138,000 and $153,000 for single filers and $218,000 and $228,000 for married couples filing jointly. You will want to discuss your eligibility with your financial advisor, especially if you are considering a ‘backdoor’ Roth conversion that allows you to transfer after-tax 401(k) contributions to your Roth IRA.
Example Goal: Increase my 401(k) contributions to match the $22,500 deferral limit.
2. Secure your estate
2023 would be a perfect time to finish, start or update your estate plan. There are many good reasons to review your long-term plan. Policy changes, the economy and major events in your life make it necessary to review and perhaps update critical features over time. To get started, you may want to include your planning team (financial advisor, CPA, estate planning attorney, etc.) in reviewing the following:
- Estate Planning Documents: will, revocable trust, power of attorney, living will, health care proxy and HIPAA release
- Update Your Personal Financial Statement
- Review disability and long-term care insurance to determine if your coverage is sufficient
- Review your asset protection strategy
- Be sure you have adequate property and liability insurance coverage
- Review all beneficiary designation forms to align with The SECURE Act 2.0. (If you haven’t reviewed this with your advisor yet, commit to do so in 2023).
These are all important documents that will need attention, especially if they are more than three years old or if you have experienced any major life changes. If you haven’t done so already, begin communicating appropriate information about your estate plan to your adult children (over 18), including critical documents.
Example Goal: Meet with my financial advisor, accountant, and estate attorney by the end of the first quarter to review relevant documents and update my estate plan.
3. Get your financial house in order
As we pursue our goals, it can be frustrating and even harmful to waste valuable time searching for important documents and other essential information. Misplaced and outdated information can also derail any momentum we build during the year. That’s why getting organized can be one of your most important resolutions.
To get started, be sure to update your list of all key advisors: Financial Advisor, CPA/accountant, Attorney, Insurance Representative, Executor or anyone else you rely on for expertise. Once this is done, go through your checklist of necessary items: Emergency papers or information, brokerage account statements, retirement plan statements, employer benefits summaries, life insurance policy documents, health insurance policy, ID cards, property and casualty insurance papers, beneficiary forms, long term care insurance, mortgage documents, tax records including last year’s return, bank statements, credit card statements and any other documents you have filed in various places. As you secure your items, be sure to put them in one, easily accessible location.
Our firm has created a comprehensive list of items for getting your financial affairs in order. You can request a copy from your DBR & CO advisor.
Example Goal: Complete and/or update the DBR & CO LifePlan Checklist by the end of the first quarter to ensure I am keeping track of critical documents and their locations.
As we enter 2023, our financial preparedness for what lies ahead begins with setting goals. But as we have learned, a financial goal without a plan to achieve it becomes nothing more than a wish. The lessons learned from 2022 can help guide us when planning for the new year ahead. The best news is you don’t have to pursue your resolutions on your own.
Thanks for reading.
This material has been provided for general, informational purposes only, represents only a summary of the topics discussed, and is not suitable for everyone. The information contained herein should not be construed as personalized investment advice or recommendations. Rather, they simply reflect the opinions and views of the author. D. B. Root & Company, LLC. does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. There can be no assurance that any particular strategy or investment will prove profitable. This document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such sources, and take no responsibility therefore. This document contains certain forward-looking statements signaled by words such as "anticipate," "expect", or "believe" that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. As such, there is no guarantee that the expectations, beliefs, views and opinions expressed in this document will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. All investment strategies have the potential for profit or loss. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. The impact of the outbreak of COVID-19 on the economy is highly uncertain. Valuations and economic data may change more rapidly and significantly than under standard market conditions. COVID-19 has and will continue based on economic forecasts to have a material impact on the US and global economy for an unknown period.
Chief Planning Officer
Nancy I. Kunz
CFP®, CPFA®, ChFC®, CLU®