“Big things come in small packages,” and the 1% Change is precisely that tiny package.

What does a 1% Change do for you?

A great example at the highest level is the Professional Golfers Association (PGA.

Looking at the top 25 golfers in scoring average, the difference between #1 Rory McIlroy and #25 Billy Horschel.

Rory’s average through last weekend in 60 rounds of golf – 68.67 strokes per round

Billy’s average through last weekend in 78 rounds of golf – 70.023 strokes per round

A slight difference of 1.97% 

A significant difference in earnings 

Rory McIlroy – $8,654,566

Billy Horschel – $4.940,600

A 175% increase.

Your 1% Change

Making a 1% change to your retirement plan annual contributions each year can impact your future retirement savings.

Inflation and the IRS

With high inflation, the US Individual Income tax brackets will significantly expand in 2023.

Inflation is not suitable for our financial lives today or ever. However, the impact of high inflation allows you to impact your future.

In addition to expanding the tax brackets, the IRS has issued the 2023 retirement plan contribution limits, and with the impact of inflation, there are significant increases.

2023 Retirement Plan Contributions Limits

401(k) $22,500

Over 50 401(k) $30,000

IRA/ROTH $6,500

SIMPLE IRA $15,500

Over 50 SIMPLE IRA $19,000

SEP IRA $66,000

Actions to Consider for Your Future Retirement Savings

  • Review your annual retirement plan contribution – Are you at the maximum? If not, consider a yearly increase.  
  • Does your 401k retirement plan offer a ROTH CONTRIBUTION?  – When withdrawing from a traditional 401k, you’d have to pay taxes on the money your investments earned—and on any contributions you initially deducted from your taxes. Your future ROTH withdrawals are tax-free if you meet specific requirements. 

Additionally, ROTH accounts do not have Required Minimum Distribution requirements, so your money can stay in the account and keep working toward growing tax-free.

  • An IRA conversion can get you into a Roth IRA—even if your income is too high – The conversion would be part of a 2-step process, often referred to as a “backdoor” strategy. Make sure you understand the tax consequences before using this strategy.
  • Own your business?  – Tax laws allow your spouse and children to work for you, then set up a ROTH IRA. Don’t miss this opportunity to save income tax and create retirement savings account for your spouse and children.

Still, need additional advice about how to make your retirement future better?

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Not everyone will qualify for a Backdoor Roth IRA. Independent Financial Group (IFG) does not give tax advice. IFG Registered Representatives (RR) do not give tax advice while acting as an RR. These matters should be discussed with your tax professional. No investment strategy can guarantee a profit or protect against loss.

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