Year to year, investment and account maximums can change. There were numerous changes for 2023 that we should review. These images were nicely done by @delyannethemoneycoach.
Does this mean you should increase your investment contributions?
This depends on your investment objectives and outcomes. The compound interest calculator is a really easy way to estimate how much money you will have from investing. I use a 10% estimated interest rate because my money is in the S&P500 and that is the historical average. Your interest rate may be different if using different investments.
Remember that you can withdraw 4% of your account without running out of money in retirement (not a guarantee but the best estimate we have). Here is the link to my blog post on calculating your financial freedom number is you need a refresher.
With all that said, run your numbers. How do they look? For young people, it is hard to predict how much you might need 20+ years from now. To an extent, I think it is better to ¨over¨ invest then under invest. If you get close to retirement and realize you do not have enough money to maintain your current lifestyle, you won´t have a ton of options. So bump up those Roth IRA contributions or increase the 401K contributions; your future self will thank you.
If you invest in a Roth or Traditional IRA, you have until April 15, 2023 to max out your 2022 contribution of $6,000.
Flexible Spending Account contribution limit is $3,050 for 2023
Dependent Care FSA remains at $5,000 per household
Disclaimer: I am an educator, not your personal financial advisor. Please make sure to do your own research before moving forward with any actions discussed in this newsletter.
Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Past performance does not guarantee future performance. Always remember to make smart decisions and do your own research!
