Greetings From BFG
Client satisfaction is always our top priority, and we are grateful to have the opportunity to serve all our clients, new and old. In our efforts to better serve you we have begun the process of expanding our current office. Adjacent to BFG is a vacant office that we will be expanding into, we will use this extra space to create conference rooms, workstations and office’s.
We look forward to sharing this new space with you, and as BFG grows we will continue to seek out ways to better serve you, our valued clients and friends.
SECURE Act 2.0: An Overview
In the final days of 2022, Congress passed a new set of retirement rules designed to facilitate contribution to retirement plans and access to those funds earmarked for retirement.
The law is called SECURE 2.0, and it is a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in 2019.
The sweeping legislation has dozens of significant provisions; here are the major provisions of the new law.
New Distribution Rules
Required minimum distribution (RMD) age will rise to 73 years in 2023
By far, one of the most critical changes was increasing the age at which owners of retirement accounts must begin taking RMDs. Further, starting in 2033, RMDs may begin at age 75. If you have already turned 72, you must continue taking distributions. However, if you are turning 72 this year and have already scheduled your withdrawal, we may want to revisit your approach.
Access to funds
Plan participants can use retirement funds in an emergency without penalty or fees. For example, 2024 onward, an employee can take up to $1,000 from a retirement account for personal or family emergencies. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse.
Reduced penalty
Starting in 2023, if you miss an RMD for some reason, the penalty tax drops to 25 percent from 50 percent. If you promptly fix the mistake, the penalty may drop to 10 percent.
New Accumulation Rules
Catch-up contributions
From January 1, 2025, investors aged 60 through 63 years can make annual catch-up contributions of up to $10,000 to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, the law applies certain stipulations to individuals with annual earnings more than $145,000.
Automatic enrollment
In 2025, the Act requires employers to automatically enroll employees into workplace plans. However, employees can choose to opt-out.
Student loan matching
In 2024, companies can match employee student loan payments with retirement contributions. The rule change offers workers an extra incentive to save for retirement while paying off student loans.
Revised Roth Rules
529 to a Roth
Starting in 2024, pending certain conditions, individuals can roll a 529 education savings plan into a Roth individual retirement account (IRA). Therefore, if your child receives a scholarship, goes to a less expensive school, or does not go to school, the money can get repositioned into a retirement account. However, rollovers are subject to the annual Roth IRA contribution limit. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. Tax-free and penalty-free withdrawals are also allowed under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.
SIMPLE and SEP
2023 onward, employers can make Roth contributions to savings incentive match plans for employees (SIMPLE) or simplified employee pension (SEP).
Roth 401(k)s and Roth 403(b)s
The new legislation aligns the rules for Roth 401(k)s and Roth 401(b)s with Roth IRA rules. From 2024, the legislation no longer requires minimum distributions from Roth accounts in employer retirement plans.
More Highlights
Support for small businesses
In 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100 percent from 50 percent for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan.
Qualified charitable donations (QCDs)
2023 onward, QCDs will adjust for inflation. The limit applies on an individual basis; therefore, for a married couple, each person who is 70½ years and older can make a QCD as long as it remains under the limit.
The change in retirement rules does not mean adjusting your current strategy is appropriate. Each of your retirement assets plays a specific role in your overall financial strategy, so a change to one may require changes to another.
Moreover, retirement rules can change without notice, and there is no guarantee that the treatment of specific rules will remain the same. This article intends to give you a broad overview of SECURE 2.0. It is not intended as a substitute for real-life advice. If changes are appropriate, your trusted financial professional can outline an approach and work with your tax and legal professionals, if applicable.
New Retirement Contribution Limits for 2023
The Internal Revenue Service (IRS) has released new limits for certain retirement accounts for the coming year. After months of high inflation and financial uncertainty, some of these cost-of-living-based adjustments have reached near-record levels.
Keep in mind that this update is for informational purposes only, so please consult with an accounting or tax professional before making any changes to your 2023 tax strategy. You can also contact your financial professional, who may be able to provide you with information about the pending changes.
Individual Retirement Accounts (IRAs)
Traditional IRA contribution limits are up $500 in 2023 to $6,500. Catch-up contributions for those over age 50 remain at $1,000, bringing the total limit to $7,500.
Remember, once you reach age 73, you must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
Roth IRAs
The income phase-out range for Roth IRA contributions increases to $138,000-$153,000 for single filers and heads of household, a $9,000 increase. For married couples filing jointly, phase-out will be $218,000 to $228,000, a $14,000 increase. Married individuals filing separately see their phase-out range remain at $0-10,000.
To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death.
Workplace Retirement Accounts
Those with 401(k), 403(b), 457 plans, and similar accounts will see a $2,000 increase for 2023, the limit rising to $22,500. Those aged 50 and older will now have the ability to contribute an extra $7,500, bringing their total limit to $30,000.
Once you reach age 73 you must begin taking required minimum distributions from your 401(k) or other defined-contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
SIMPLE Accounts
A $1,500 increase in limits for 2023 gives individuals contributing to this incentive match plan a $15,500 stop light.
Much like a traditional IRA, once you reach age 73, you must begin taking required minimum distributions from a SIMPLE account in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
As a reminder, this article is for informational purposes only. Consult with an accounting or tax professional before making any changes to your 2023 tax strategy.
Five Most Overlooked Tax Deductions
Who among us wants to pay the IRS more taxes than we have to?
While few may raise their hands, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Let’s take a quick look at the five most overlooked opportunities to manage your tax bill.
Reinvested Dividends
When your mutual fund pays you a dividend or capital gains distribution, that income is a taxable event (unless the fund is held in a tax-deferred account, like an IRA). If you’re like most fund owners, you reinvest these payments in additional shares of the fund. The tax trap lurks when you sell your mutual fund. If you fail to add the reinvested amounts back into the investment’s cost basis, it can result in double taxation of those dividends.12
Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
Out-of-Pocket Charity
It’s not just cash donations that are deductible. If you donate goods or use your personal car for charitable work, these are potential tax deductions. Just be sure to get a receipt for any amount over $250.
State Taxes
Did you owe state taxes when you filed your previous year’s tax returns? If you did, don’t forget to include this payment as a tax deduction on your current year’s tax return. There is currently a $10,000 cap on the state and local tax deduction.
Medicare Premiums
If you are self-employed (and not covered by an employer plan or your spouse’s plan), you may be eligible to deduct premiums paid for Medicare Parts B and D, Medigap insurance, and Medicare Advantage Plan. This deduction is available regardless of whether you itemize deductions or not.
Income in Respect of a Decedent
If you’ve inherited an IRA or pension, you may be able to deduct any estate tax paid by the IRA owner from the taxes due on the withdrawals you take from the inherited account.
- Fidelity.com, December 23, 2022
- CNBC.com, December 22, 2022
- Fidelity.com, December 22, 2022
- Fidelity.com, December 22, 2022
- Paychex.com, December 30, 2022
- PlanSponsor.com, December 27, 2022
- CNBC.com, December 23, 2022
- Forbes.com, January 5, 2023
- Forbes.com, January 5, 2023
- Paychex.com, December 30, 2022
- FidelityCharitable.org, December 29, 2022
- TheBalance.com, 2021
- IRS.gov, 2022
- RS. gov, 2022
- RS. gov, 2022
- IRS.gov, 2022.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
In Memory
On February 9, 2023, Matt Rueter passed away while vacationing in Jamaica. As a member of the BFG family for over 20 years, Matt took great pride in protecting the well-being of the families he served. He was our friend, brother, mentor and important part of our team. We will miss Matt immensely. As part of the BFG family, Matt knew his clients would be taken care of by the rest of the team. We will be reaching out to everyone to schedule reviews as needed. If you have questions or need assistance in the meantime, do not hesitate to call the office.
RIP our friend
Matthew A. Rueter, August 22, 1972 – February 9, 2023