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Planning Opportunities for 2023

Planning Opportunities for 2023

January 11, 2023

The recent passage of the SECURE 2.0 Act has grabbed a lot of headlines. The bill contains a long list of provisions related to retirement plans, such as increasing the Required Minimum Distribution age (from 72 to 73, and later 75), improvements to retirement plan contribution limits, inflation adjustments to Qualified Charitable Distributions, and the (limited) ability to roll funds from a 529 plan to a Roth IRA.

These changes present an attractive planning opportunity for retirement plan participants, but the majority of these changes won’t go into effect until 2024 or later. Thus, rather than spill too much ink on the SECURE 2.0 Act (you can check out this article from Baird’s Wealth Solutions Group if you want a more in-depth look), I’d like to focus on a few key planning categories and opportunities for investors in 2023.

Tax Adjustments

  • Income tax brackets received an inflation adjustment, allowing more income to be taxed at lower levels than in 2022 (a comparison of last year’s brackets to this year’s can be found here).
    • Additionally, tax brackets are set to revert to pre-TCJA levels in 2026 (i.e. tax rates will increase). Work with your tax adviser to determine whether accelerating your taxable income between now and 2025 may prove advantageous in the long run.
  • The standard deduction rose $900 per taxpayer (from $12,950 to $13,850 for single taxpayers, and from $25,900 to $27,700 for married filing jointly).
    • For those who are charitably inclined but don’t typically itemize their deductions, “bunching” charitable contributions every other year could make sense.
  • The lifetime gift and estate exemption amount rose from $12.06m to $12.92m per person.
    • This is a significant increase compared to prior years, and presents a very attractive opportunity for additional gifting for those who have already maxed out their lifetime gifting exemption. Remember, the current exemption amount is scheduled to sunset at the end of 2025, at which point it will be reduced by roughly 50% (~$6-7m per person). For those with sizeable estates, this presents a huge tax-savings opportunity.

Retirement Accounts

  • The annual limit for IRA contributions rose from $6,000 per person to $6,500 (plus a $1,000 catch-up contribution for those over age 50).
  • The annual limit for 401(k) and 403(b) contributions rose from $20,500 per person to $22,500 (the catch-up contribution for the 50+ crowd also rose from $6,500 to $7,500).
  • The Total Defined Contribution plan contribution limit rose from $61,000 to $66,000 (plus catch-up contributions).
  • The SECURE 2.0 Act did not contain final guidance for 10-yr inherited IRA distributions. Thus, these distributions are still discretionary for 2023, and not subject to a minimum requirement.
    • Consult with your tax adviser to determine whether, and how much, you should withdraw from a non-spousal inherited IRA that you received within the last three years.
  • If asset prices remain depressed this year, consider a (partial) Roth conversion. If you’re still relatively young or in a low tax bracket, converting assets from a Traditional IRA to a Roth IRA while the market is down allows you to transfer more shares, and the future growth of those shares, to an account where those shares will never be taxed (under current law). Roth conversions are also available in many 401k plans.


  • Market declines are merely buying opportunities for long-term investors, allowing you to purchase future earnings at a reduced price. Uncertainty is scary, but remember, the stock market is the only market in town where shoppers close their wallets and run away when there’s a sale.
  • Reallocating during a market downturn offers two (potential) benefits: shifting to a more optimal investment allocation while simultaneously capturing capital losses to offset current and future gains.
  • Bonds are back, baby! Sure, they took it on the chin in 2022 during the fastest series of rate hikes on record, but yields are finally back to more respectable levels, meaning that you no longer have to buy “junk” to get a decent (~5%) yield. Even cash alternatives are yielding close to 3%. All of this means that for those with short- and intermediate-term liquidity needs, fixed income presents a more attractive option than before.*

My hope is that these timely planning considerations lead to productive conversations and positive outcomes in the year ahead.

And Now For Something Completely Different...

An old Harvard Business Review article on the art of the elevator pitch.

*Fixed income is generally considered to be a more conservative investment than stocks, but bonds and other fixed income investments still carry a variety of risks such as interest rate risk, credit risk, inflation risk and liquidity risk. In a rising interest rate environment, the value of fixed income securities generally declines and conversely, in a falling interest rate environment, the value of fixed income securities generally increases. High-yield securities may be subject to heightened market, interest rate or credit risk and should not be purchased solely because of the stated yield.