Five Actions to Set Yourself Up for Success in 2023

Maura Schauss |

Ann Blakey, CFP® at Washington Wealth Advisors

Ready to begin 2023 on the right foot?  We are highlighting five actions to take in your financial life to get you started on the right foot and remain on track towards achieving your goals.

1. Make Your 2022 IRA and HSA Contributions

Remember that you have until April 18, 2023 to make your 2022 IRA and HSA contributions. 

Regarding IRAs:  If your 2022 income was within the IRS’s published limits, consider a Roth IRA first to set you up for tax-free income during retirement.  Another key benefit of having your money in a Roth account is that it is not subject to required minimum distributions, meaning the funds can be left in the account to grow as long as you’d like.

Regarding HSAs:  Funds deposited in an HSA will also supply tax-free income in retirement.  And, on top of that, HSA contributions also lower your current taxable income, so it’s a double-win!

2. Consider a Roth Conversion

If your income in 2023 will be lower than normal, then it may make sense to convert some or all of your Traditional IRA to a Roth IRA.  This can be especially advantageous to execute while the stock and bond markets are down. In doing so, you would pay the income taxes on the money upon conversion – at your 2023 rates – so that you could take all withdrawals tax-free in retirement. The great thing is there are no limitations to this conversion.

Learn more about Roth IRAs from our Blog Roth Conversions: A Silver Lining to Lower IRA Balances in a Volatile Market

3. Education Funding Through 529 Plans

529 plans are a great way to save for college, since the money contributed will grow tax-deferred and future withdrawals will be tax-free as long as they are used for qualified education expenses.

If you’re still working on saving for your children’s college education, then you may benefit from putting some money into a 529 plan early in 2023, in order to maximize the tax-deferred/tax-free growth.

4. Maximize 401(k) Contributions

Maximizing contributions to a qualified retirement account is another great way to reduce your tax bill.

401(k) Contribution Limits in 2023: Up to $22,500 ($30,000 if over the age of 50)

Money that is contributed to qualified retirement accounts, including 401(k)s and 403(b)s, is removed from your current taxable income, which in turn reduces your tax bill.  So be sure that your payroll department has adjusted your contributions to the new 2023 limit.

If you aren’t participating in an employer-sponsored plan, you can contribute to a Traditional IRA instead.

Traditional IRA Contribution Limits in 2023: Up to $6,500 ($7,500 if over the age of 50)

This option also removes the money from your taxable income and reduces your tax liability.

Learn more about contribution limits for 2023 in our Key IRS Numbers Blog.

5. Rebalance Your Investment Portfolio

Now is a good time to review and rebalance your investment portfolio so that it aligns with your unique goals for 2023. It’s a great way to start the year off on the right foot by making sure you are not exposing your finances to unnecessary risk. Rebalancing also allows you to check in with yourself and make sure your money is working in your favor to advance your most important goals, objectives, and priorities. 

If you have savings to invest for the long-term, setting up a dollar-cost-averaging savings plan in 2023 could be an excellent way to take advantage of low prices on stocks and bonds.

Plan Ahead for 2023

As we continue to monitor markets, inflation, and other global factors, it’s more important than ever to make sure you’re financially prepared. If you’re looking to review your financial plan and get a head start in 2023, reach out to us today.

Our Washington Wealth Advisors team is here to help our clients implement these strategies and more, so that you can get back to enjoying your day-to-day.  We call that financial peace of mind. Call our office at 703.584.2700, email clientservices@washingtonwealthadv.com, or schedule time with us.

 

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ABOUT WASHINGTON WEALTH ADVISORS

Washington Wealth Advisors is a fee-only registered investment advisory firm serving busy families, executives, women building wealth, and small business owners. We provide Wealth Advisory Services—financial planning coupled with asset management—guided by a personalized investment strategy based on each client’s unique goals. Our fiduciary approach, independent advice, and proactive investment management help to support our clients’ overall financial peace of mind.