Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any incivic agenda are unmanaged representative securities offered through Cambridge Investment Research Incorporated, a broker, dealer, member of FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning, and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate, joined here with Mike this morning, NelsonCorp Wealth Management. Hard to believe we are mid-November, and we are still looking at mid-60s for today.
Mike Steigerwald:
I couldn’t believe it-
Nate Kreinbrink:
And tomorrow.
Mike Steigerwald:
Yeah, that’s a beautiful thing. Got to appreciate it while it’s still here.
Nate Kreinbrink:
I totally agree. It was so nice this weekend. Cracked a couple windows, let a little fresh air in. Just being outside. It definitely does not feel like next week is Thanksgiving already.
Mike Steigerwald:
Yeah, it’s crazy.
Nate Kreinbrink:
Holiday Christmas music is on the radio channels already. Think you’re…
Mike Steigerwald:
Yep. Every store you go into has got their Christmas stuff up.
Nate Kreinbrink:
Although I think some of it… And I would not consider myself a scrooge by any means, but I’m a traditional, like, wait until Friday-
Mike Steigerwald:
After Thanksgiving…
Nate Kreinbrink:
… after Thanksgiving to start doing that. I think the warm weather has helped my cause a little bit this year because people don’t necessarily, I think… I don’t know, maybe it’s just me, but don’t necessarily feel-
Mike Steigerwald:
I agree. It doesn’t feel like it.
Nate Kreinbrink:
… it’s Christmas time yet.
Mike Steigerwald:
It doesn’t feel like it. I’m with you on that.
Nate Kreinbrink:
But when you’re starting to look at, they had a countdown. I’ve seen whatever. Obviously, Thanksgiving is next Thursday. They had a countdown so many days until Christmas Eve, so many days until the new year. So many like it is here.
Mike Steigerwald:
More importantly is how many days until the days start getting-
Nate Kreinbrink:
Longer.
Mike Steigerwald:
… longer, right?
Nate Kreinbrink:
I know.
Mike Steigerwald:
We’ve hit that spot where it’s dark by the time we’re heading home, and when we wake up in the morning, still dark, we want those hours of sunshine back.
Nate Kreinbrink:
Oh, most definitely. That’s a tough thing when you’re heading home and it’s dark.
Mike Steigerwald:
First few weeks of the daylight savings always catch me.
Nate Kreinbrink:
Yes, they’re an adjustment, I think, to say the least. But again, it’s getting closer to do these Christmas programs in the schools, all that kind of excitement. And again, looking forward to it. It’s a special time of the year. Obviously, reality will set in with the weather, and we’ll get down to what we’re supposed to get. I always say, “I don’t mind these nice temperatures now as long as they don’t get added on until March and April.”
Mike Steigerwald:
That’s true.
Nate Kreinbrink:
When it’s ready to, like, we need to get out of winter, let’s not just keep prolonging it that way a little bit. So end of the year also brings about some interesting times, I guess, on our front. We just recently had the IRS come out and unveil the new limits for next year as far as contribution limits, IRAs, Roth accounts, 401k accounts, what the new tax brackets are, standard deduction, all those things. Social Security came out with their new cost of living adjustment. Obviously, followed right behind that, as always, Medicare and what the Part B premiums are going to be for next year.
Maybe talk a little bit, Mike, as far as the contributions. I know people always look at that to say, “Hey, what are they going to be? How much can I put away into IRA accounts on my own?” That type of stuff.
Mike Steigerwald:
Sure, sure. So, yep, the annual contribution limit for IRAs is up to $7,000. So that’s up $500 from the prior year. IRA catch-up contribution limit for over 50, so if you’re 50 years or older, remains at $1,000, so that means $8,000 total. And then, 401k plans can contribute up to $23,000 in 401Ks, 4013Bs, and most 457 plans. So that’s up $500 as well. So those increases we like to keep track of on a yearly basis, make sure if we’re in the position to maximize those contributions. We certainly want to do so to keep the plan going forward for your long-term goals.
Nate Kreinbrink:
Right. And I think where that comes important to, obviously, we want to look if you’re able to max out those type of accounts. What you need to keep in mind, though, is if you’ve got an automatic monthly contribution, say going into an IRA account or a Roth account, basically to max it out. You’re going to probably need to go in there and up that starting in January if you want to continue to max that out. Otherwise, it’s going to continue to pull the same amount that you’ve always been doing to hit last year’s max. Obviously, this year it goes up $500 if you’re going to want to continue to max it out up that contribution in order to get that full max with that.
Mike Steigerwald:
Certainly, and just something to keep in mind when these changes happen every year. And just to be aware of it, to really maximize what you can do and put away.
Nate Kreinbrink:
Right. And so again, if you’ve got questions on that, talk to your provider, talk to your advisor, get that full away. It’s a good thing. I mean, it went up literally $1,000 over the last two years. It’s an opportunity for you to be able to take advantage of savings. Inflation determines those income and/or those increases every year. So again, I guess, if there’s a good thing with high inflation that we’ve had, it’s to a point where it’s allowing us to raise the bar on the amount that we can put into it.
So the other thing, as far as with inflation for numbers for next year, is the social security cost of living adjustment. So each year, basically, mid-to-end October, Social Security administration comes out with their following-year cost of living adjustment. That is the increase that those receiving benefits are going to get on their monthly check.
Now, for 2024, that increase is 3.2%. So again, if you compare that to what we’ve had in years past, looking at the previous couple of years, last year, or the increase for 2023, was a historically high one at 8.7%. That was coming off the heels of 2022 coming in at 5.9%.
So looking at it from the last couple of years, that cost of living adjustment for next year is a little bit lower. What that means? If you’re getting an average of a $1,500 benefit a month, it’s going to translate to an increase of about $50 a month is basically what that is going to translate to. So obviously, if your benefit is higher than that 1500, that 3.2% is going to be bigger. If it’s lower, obviously, then it’s going to be a little bit smaller. But that gives you an idea of what that increase is going to be. That, as I mentioned before, comes just prior to the Medicare increases for 2024.
For 2023, Medicare Part B premiums were roughly $164. For 2024, that Part B premium is going to be $174. So it went up roughly about $10 as far as per month for Part B premium. That’s not including any drug plan. That’s just for that part B premium that you’ll pay. And obviously, that is income-adjusted. So if you are a little bit higher in your income and you hit certain thresholds, you’re going to pay a little bit more than that 174, but that’s that first tier as far as for the Medicare premiums, where that’s going to be. So again, all things to keep in mind for those individuals that are receiving Social Security benefits that are of Medicare age or on Medicare programs. It gives you an idea as far as what those will be continuing into for next year.
Now, we get into some of that and that gets us to a little bit of tax planning.
Mike Steigerwald:
Sure.
Nate Kreinbrink:
End of the year time like this is an important time to look at that, understanding the differences between a 1231 deadline of what you need to have done by the end of the year versus a tax deadline of mid-April 15th, 16th, whatever that tax deadline falls of for the following year. We’ve still got time to do some planning, and I think that’s where we’re headed with a lot of our clients and our meetings reviewing some of those end of the year stuff we want to look at.
Mike Steigerwald:
Absolutely. And that’s something we hear a lot in meetings and talking with clients is. What do these changes mean for me and my situation? Well, again, we can’t stress enough how every situation is an individual situation, right? Everybody’s situation’s a little different than your brother’s friends, your neighbors, anybody else, so we always stress the importance of creating that plan, customizable to you and your needs, and when these types of things happen with changes going forward, as well as some increases in potential benefits, things like that, we just like to make sure we’re on top of it and really maximizing what we can do for our clients.
Nate Kreinbrink:
Exactly, and I think that’s extremely important to keep in mind if you hear somebody mention like, “Hey, I did this, and it worked out so good for me.” Well, obviously, your position is different than theirs. And you want to make sure that those same rules apply to you and is going to affect you the same way as what it did for them. And I think a big part of that is when you’re looking at “Should I contribute to an IRA, or should I contribute to a Roth?” And depending on what your age is with the new tax laws in the state of Iowa, if you’re over age 55 for anybody in Illinois, there’s some things that we may want to look at it may be not just as straight as making a Roth contribution. We may want to go a different route and maybe get the end result the same, but by taking an extra step may have some tax savings for us to do that.
So again, it’s not sometimes as straightforward as what we may want to view it as to be. If we can maybe take one extra step to get to that same thing and save 5% on the state-level thing, it’s definitely worth taking a look at.
Mike Steigerwald:
Absolutely. Sounds like good plan to me.
Nate Kreinbrink:
So again, if you want to look at some of those stuff, end of the year planning, Roth conversions have a 1231 deadline. Again, any contributions to IRA, to a Roth accounts have the tax filing deadline of mid-April to make a prior-year contribution. So if you still got room in those accounts and looking to save, understand those different deadlines, what needs to be done by each one to make sure you get that in a timely manner. And as we always say, don’t wait until that last day. Don’t wait until December 29th to start doing this for a 1231 deadline. There’s a lot of people that are going to be doing that, and it’s going to be best efforts attempt at that point in time, and it may or may not get done by then.
Mike Steigerwald:
Right, right. Like we say, stay ahead of the game, right?
Nate Kreinbrink:
So again, before we run out of time here, I did want to mention that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of November will be donated to the Caring Closet, which is located at the First Presbyterian Church in Davenport. Again, this is Nate and Mike with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks again for tuning in, and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker, dealer, member FINRA, SIPC, investment advisor, representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.