Ask Ashley: Year-End Planning, Social Security Income

Dec 15, 2022 | Tax

View the full transcript below.

Video Transcript:

Hello, clients and friends of Hutchinson Family Offices. My name is Ashley Madden and I’m the Director of Financial Planning. This year I’m bringing you a series of three videos covering a wide variety of topics for you to consider for your year-end planning.

The focus of this first video is on social security income, Medicare, and also changes to retirement plan contributions for those of you still working.

So, we’ve all been feeling the impact of inflation over the past year. In addition to paying more for goods and services we use daily, there are significant increases for 2023 in various inflation index parameters in social security benefits and retirement plan contributions. Starting in 2022 and continuing this next year, we have some of the highest cost of living adjustments to social security benefits that we’ve seen in years 2022, bringing an increase of 6.2% and now, starting in January 2023, we’re looking at an additional 8.7% increase in social security. If you don’t have federal income taxes withheld from your Social Security check, you may have more income tax than in previous years. So you may need to review how you set aside money to pay those taxes. Whether you’re paying taxes from estimated tax payments, maybe you have additional withholding to help pay for taxes on your social security through income, uh uh, through other sources. Or are you having federal taxes withheld from your Social Security check? If not, is that something that you maybe are ready to consider?

On the heels of social security, let’s talk Medicare. So Medicare Part B premiums are actually going down slightly for 2023. So for Medicare recipients who were on Medicare, you are gonna see the full impact of that Social security cost of living increase for this upcoming year. It won’t really be reduced by Medicare premiums as occurs some years. This is even more reason to review how your Social security income may be taxed because you don’t want any unwanted surprises when it comes time to file your taxes next year. One additional comment on Medicare Part B premiums. Remember that your Medicare Part B premiums are based on your income level with a two-year lookback. So let’s say you have a year with a particularly high income. Maybe you sell some stock in a taxable account on a low-cost basis. Maybe you sell a rental or vacation property or do a Roth conversion. Any of those are the things that could raise your income in a particular year and Then, later on, affect your Medicare premiums. Just something to be aware of. Remember that Medicare open enrollment started October 15 and continues through December 7 this year. That’s the time that you can make changes to your existing coverage.

Now for those still working, we have increases in retirement contribution limits. 401K and IRA contributions are both increasing. This year you can put in for 2023 up to $22,500 in a 401K using a standard pretax contribution or consider using summer all of the contributions in Roth, which has contributed after taxes, but then grows tax-free for those 50 and older. With the catch contribution, that takes you up to $30,000 per year. That is a lot more than we used to be able to contribute even a decade ago. IRA and Roth IRA limits are also increasing for 2023 up to $6,500. Or for those 50 and older, it’s up to $7,500 unless your earned income that is allowable for the IRA or Roth IRA is less than those amounts. And then, you can contribute up to a hundred percent of your net earned income. So if you haven’t looked at how you’re funding retirement, this may be a good year to look it over. You want to be thinking about what percentage from a 401K or a dollar amount you’re putting into an IRA or a Roth IRA account, whether you’re putting in pre-tax dollars or Roth after-tax dollars or some combination of the two that might be right for your situation. And also trying to max out an employer contribution on a 401K plan whenever possible.

So I hope you’ve enjoyed this video.

Please remember this is just general tax advice, and everyone’s situation is unique. You want to seek specific tax advice or do your own research to ensure that you are implementing the right plan.

And please feel free to send me feedback, questions or suggestions for future video content to

We’ll be sending out second video soon on charitable giving strategies and gifting. So keep your eyes open for that. Thank you.

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