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Here are the biggest retirement changes coming in 2023

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Soaring inflation this year has decimated retirement savings accounts and left retirees slumped by spiraling prices from gas and food to monthly rent.

The fallout from higher prices has changed the landscape for older Americans and those saving for their golden years, while a last-minute spending deal to avoid a government shutdown included a handful of changes to the pension system next year.

Here’s a snapshot of what’s to come in 2023.

New retirement reforms

A number of pension reforms are included in the federal spending package passed by Congress. Starting next year, retirees must begin taking required minimum withdrawals, or RMDs, from tax-advance retirement accounts when they turn 73. That’s up from 72 this year. That will come to 75 years in the year 2033.

The legislation also provides a $500 tax credit for small businesses that:

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  • allowing employees of a military spouse to qualify for their employer’s retirement plan within two months of starting work,

  • allowing these workers to obtain employer matches two years prior to service, and

  • These workers make 100% immediately in all employer contributions.

The new bill includes a host of other changes to the retirement system — most of them small and some of them good news only for wealthy Americans — that will go into effect after 2023. Here’s a A comprehensive look at what the legislation entails.

WASHINGTON, DC - DECEMBER 22: The dome of the US Capitol building in Washington, D.C., on December 22, 2022 (Photo by Elisabeth Frantz for The Washington Post via Getty Images)

The dome of the US Capitol building in Washington, D.C. on December 22, 2022 (Photo by Elisabeth Frantz for The Washington Post via Getty Images)

Medicare key changes

Medicare Part B premiums and deductibles go down. For the first time in more than 10 years, Medicare will become cheaper for millions of retirees. The monthly premium for Medicare Part B, which covers doctor visits and other outpatient care not covered by Medicare Part A, will be $164.90 for 2023, a decrease of 3%, or $5.20 per month, from $170.10 in 2022.

The annual deductible for all Medicare Part B beneficiaries will be $226 in 2023, down from the annual deductible of $233 in 2022.

Next year, thanks to the provisions in Inflation Reduction Actthe 3.3 million Medicare Part D beneficiaries with diabetes will benefit from ensuring that insulin will cap shared costs of $35 for a one-month supply.

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Another notable change in 2023: Vaccines covered by Part D will not come without subscriptions or discounts. This will reduce the cost of expensive vaccinations, such as the herpes zoster vaccine.

While the Inflation Control Act introduced the most important changes to Medicare in nearly two decades, most of the provisions for the 59 million beneficiaries, including lower prices for prescription drugs and out-of-pocket costs, will not take effect for several years.

SEA RACH, CA - NOVEMBER 12, 2018: Medicare Health and Social Security Card on Medical Report with Stethoscope.  Medicare is a national health insurance program offered by the United States to seniors 65 years of age or older.  Social Security is a federal insurance program that provides benefits to retirees, the unemployed, and the disabled.
Mary Johnson, Social Security Policy Analyst seniors association, (Image credit: Getty Creative)

Huge increase in Social Security

Social Security beneficiaries will see a pay increase next year thanks to an 8.7% increase in Social Security cost of living (COLA) for the year 2023.

That increase is the largest since 1981, when the COLA rate was 11.2% and raised average retirees’ benefits by more than $140 per month as of January, according to the Social Security Administration.

Mary Johnson, Social Security Policy Analyst seniors association, He previously told Yahoo Money. “Maybe this is as good as it gets.”

Changes to retirement plan contributions

Internal Revenue Service announce Record high for annual contributions to 401(k) and similar retirement accounts for 2023. Workers with 401(k), 403(b), and most 457 plans and the federal government savings plan can contribute up to $22,500 next year, up 9.8% from $20,500 limit this year.

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For those age 50 or older, they can save an additional $7,500, up from last year’s compensation contribution limit of $6,500. In total, workers age 50 or older can contribute up to $30,000 starting in 2023.

It also increased the annual contribution limit for IRAs next year to $6,500 from $6,000 — an increase of 8.3%. Individuals age 50 or older can save an additional $1,000 in their IRA, unchanged from last year.

Contributions to a traditional IRA are tax deductible as long as you meet IRS rules, including income limits. IRA contributions are fully deductible if you (and your spouse) are not covered by a retirement plan at work. For 2023, the IRA deduction for individuals covered by a retirement plan at work is not allowed to deduct after their adjusted adjusted gross income (MAGI) reaches $83,000, versus $78,000 in 2022. The deduction disappears for married couples filing jointly when their adjusted gross income reaches to $136,000. , up from $129,000 in 2022.

Individuals can only contribute to Roth IRAs if they meet certain income requirements. Income phasing in Roth IRA contributions next year for individuals and heads of household will range from $138,000 to $153,000, up from $129,000 to $144,000 in 2022. Married couples filing jointly will see phasing outs starting at 218 ,000 to $228,000, up from $204,000 to $214,000.

Finally, the income limit for a saver’s adoption for low- and moderate-income workers is $73,000 for married couples filing together, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married couples filing separately, up from $34,000.

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HSA: The main retirement tool just got better

(Photo: Getty Creative)

(Photo: Getty Creative)

How much can you contribute next year to your Health Savings Account (HSA)? Increasing $200 for individuals and $450 for families.

The inflation-adjusted annual limit on HSA contributions for self-coverage only under a higher deductible health plan will be $3,850, up from $3,650 in 2022. The HSA contribution limit for family coverage will be $7,750, up From $7,300 USD.

This represents an increase of approximately 5.5% over the contribution limits for 2022, compared to an increase of only 1.4% between 2021 and 2022.

A health savings account option is available to people who are enrolled in a high-deductible health care plan (HDHP). You can also open an account as an independent or business owner if you have a qualified HDHP. The IRS sets parameters for these accounts annually.

With a high deductible plan, you pay a lower monthly premium than with other types of plans, but you get a higher annual deductible — the amount you pay for covered medical costs before the insurance kicks in. Money you don’t use after a year can roll over and can be used for non-eligible expenses after you turn 65.

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“From a tax perspective, it’s the next best thing,” said Paul Fronstein, director of health benefit research at Employee Benefits Research Institute, a nonprofit, nonpartisan organization, Yahoo Money previously told. It benefits from a triple tax advantage. It’s the only account that allows someone to invest money on a tax-exempt basis, allows them to build up tax-free funds, and allows them to exit tax-free for qualified healthcare expenses.”

Kerry is a senior correspondent and columnist for Yahoo Money. Follow her on Twitter @tweet

Read the latest personal finance news and trends from Yahoo Money.


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Stock, bond and cryptocurrency investors remain on edge after a rough year for the markets

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This version is for personal, non-commercial use only. Distribution and use of this material is subject to our Subscriber Agreement and copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.

https://www.wsj.com/articles/stock-bond-and-crypto-investors-remain-on-edge-after-brutal-year-for-markets-11672403124

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Dow Jones losses are heading towards the closing bell as US stocks approach their worst year since 2008

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US stocks were trimming losses heading towards the closing bell on Friday, but were still on track to post their worst annual loss since 2008, as the harvest of tax losses combined with concern over the outlook for US corporate and consumer earnings took its toll.

How are stock indices traded?
  • Dow Jones Industrial Average
    DJIA,
    -0.22%

    It fell about 182 points, or 0.6%, to 33,039 points.

  • S&P 500 index
    SPX,
    -0.25%

    It fell nearly 26 points, or 0.7%, to about 3,824.

  • The Nasdaq Composite Index fell 72 points, or 0.7%, to about 10,406 points.

Stocks posted their biggest gains of the month on Thursday, with the Dow Jones rising 345 points, or 1.05%, to 33,221 as major stock indexes rebounded after losses incurred earlier in the week that pushed the Nasdaq Composite to a new closing low for the year. . The S&P 500 was on track on Friday to wrap up its fourth consecutive losing week, the longest streak of weekly losses since May, according to FactSet data.

What drives the markets

US stocks traded lower on Friday afternoon, on pace to close the last trading session of 2022 with weekly and monthly losses.

Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many expected, as it sought to crush the worst inflation in four decades. The S&P 500 is on track to end the year with a loss of nearly 20%, its worst annual performance since 2008.

“Investors were on edge,” Mark Heppenstahl, chief investment officer at Penn Mutual Asset Management, said in a phone interview Friday. “It seems as if being able to bring prices down might be a little easier given how bad the year has been.”

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Stock indices have fallen in recent weeks as the recent rally inspired by hopes in the Fed’s policy focus faded in December after the central bank indicated it would likely wait until 2024 to cut interest rates.

On the last day of the trading year, the markets were also hit by selling to capture losses that could be written off from tax bills, a practice known as tax harvesting, according to Kim Forrest, chief investment officer at Bouquet Capital Partners. .

Forrest added that an uncertain outlook for 2023 has also weighed in, as investors worry about the strength of corporate earnings, the US economy and consumer as the fourth-quarter earnings season approaches early next year.

“I think the Fed, and then earnings in mid-January — they’ll set the tone for the next six months. Until then, it’s anyone’s guess.”

The US central bank has raised its benchmark interest rate by more than four percentage points since the start of the year, pushing borrowing costs to their highest levels since 2007.

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The timing of the first Fed rate cut will likely have a significant impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed tries to signal that it plans to keep interest rates higher for longer.

On the economic data front, the Chicago PMI for December, the latest major data release for the year, Came stronger than expected. Climbing to 44.9 from 37.2 in the previous month. Readings below 50 indicate contraction.

In the coming year, Heppenstahl said, “we are likely to shift toward concerns about economic growth rather than inflation.” “I think the decline in growth will eventually lead to an even greater drop in inflation.”

Read: Stock market investors face 3 recession scenarios in 2023

Eric Sterner, chief information officer at Apollon Wealth Management, said in a phone interview on Friday that he expects the US to fall into a recession next year and that the stock market could see a new bottom as companies likely review their earnings. “I think the earnings outlook for 2023 is still very high,” he said.

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The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all on pace Friday afternoon posting weekly losses of around 1%, according to FactSet data, at last check. For the month, the Dow was down about 5%, the S&P 500 was down about 7% and the Nasdaq was about to crash down about 10%.

Read: Value stocks are outperforming growth stocks in 2022 by a large margin historically

As for bonds, Treasury yields rose on Friday as the US sovereign debt market was set to post its worst year since at least the 1970s.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.879%

It rose about four basis points on Friday at 3.88%, according to FactSet data, in the latest check. Ten-year yields jumped about 2.34 percentage points this year through Thursday, on track for the biggest annual gain ever based on data going back to 1977, according to market data from Dow Jones.

Meanwhile, the yield on the two-year note
TMUBMUSD02Y,
4.423%

Up about 3.64 percentage points in 2022 through Thursday to 4.368%, 30-year return
TMUBMUSD30Y,
3.971%

It jumped 2.03 percentage points over the same period to 3.922%. That marks the largest increase in a calendar year for each based on data going back to 1973, according to market data from Dow Jones.

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Outside the US, European stocks capped their biggest percentage drop in a calendar year since 2018, with the Stoxx Europe 600
xxxp,
-1.27%
And the
It is an index of euro-denominated stocks, down 12.9%, according to market data from Dow Jones.

Read: A downturn in the US stock market is trailing these international ETFs as 2022 draws to a close

Companies in focus

Steve Goldstein contributed to this article.

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Fed’s reverse repo facility reaches $2.554 trillion by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve Building in Washington, US, January 26, 2022. (Reuters)/Joshua Roberts/File Photo

Written by Michael S Derby

NEW YORK (Reuters) – A key facility used by the Federal Reserve to help control short-term interest rates saw record inflows on Friday, the last trading day of the year.

The New York Fed said its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, beating the previous high seen on Sept. 30, when inflows totaled $2.426 trillion.

The cash rally was almost certainly tipping into record territory in the usual end-of-quarter pattern that could worsen further towards the end of the year. On those dates, for a variety of reasons, many financial firms prefer to deposit money in the central bank rather than in the private markets.

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The Fed’s reverse repo facility has been very active for some time. After seeing almost no absorption for a long time, money began to gravitate toward the central bank in the spring of 2021 and then grew steadily. Daily reverse repo usage has been steadily above the $2 trillion mark since June.

The reverse repo facility takes cash from qualified financial firms in what is an actual loan from the Federal Reserve. The current rate is 4.3%, a yield that is often better than rates for short-term private sector lending.

The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, and is the Fed’s primary tool for achieving its function and inflationary mandates. To mark the higher end of the range, the Fed is also pushing deposit-taking banks to deposit cash at the central bank, where the interest rate on reserve balances is now 4.4%.

The federal funds rate is currently set between 4.25% and 4.5% and is trading at 4.33% as of Friday, sandwiched between the reverse repo rate and interest on reserve balances.

There are no signs of shrinkage

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Even with the heavy use of reverse repo, Fed officials have always remained unconcerned about large outflows, even as some in financial markets worried about the potential for the Fed to drain the borrowing and lending lives of private money markets.

Fed officials also expected that as the central bank continues to raise interest rates with the goal of bringing down very high levels of inflation, the use of the reverse repo facility should decrease. But that hasn’t happened yet, and some in the markets now believe that the consistently high utilization of the Fed facility will be around for some time to come.

Research by the Federal Reserve Bank of New York indicated that banking regulation issues make demand for the Fed’s reverse repo instrument high. Meanwhile, the Kansas City Fed added its view that large inflows are related to limited private market investment opportunities and policy uncertainty.

Strong cash flows to the central bank may not have alarmed central banks, but they have driven their operations to an actual loss. The Federal Reserve finances itself through interest on the bonds it owns as well as the services it provides to the financial community. It usually makes a noticeable profit and by law returns it to the treasury.

Currently, the cost of paying interest on reverse repo agreements and reserve balances outweighs income. The Fed reported Thursday that as of Dec. 28, the accounting metric it uses to track losses was $18 billion. Many observers expect that the Fed’s plans to raise interest rates further and keep them at high levels will mean fairly large losses for the central bank over time, even if these losses will not affect the action of the Fed’s monetary policy.

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