Monthly Insights Newsletter – September 2023

Patrick’s Planning Post

Congress is Helping Age 50+ Earners, But It May Not Feel Like It

In January 2024, a new rule is scheduled to take effect for high earners making contributions to 401(k) plan retirement accounts, which is a lot of our clients! For what it’s worth, Congress has discussed delaying this new rule to provide more time for employers to prepare for it. Here’s what you need to know:

• Under current law, those age 50 or older can make up ‘catch-up’ contributions to their 401(k) plan beyond the 2023 limit of $22,500
• For 2023, the catch-up limit is an additional $7,500
• So for someone age 50+, that’s a total of $30,000 of contributions deductible from gross wages, thus bringing taxable income down (if contributed pre-tax)
• Starting in 2024, for anyone with earnings greater than $145,000 from the previous year, their catch-up must be made with Roth contributions
• In 2023 terms, that would mean the $7,500 contribution would be taxable first before being saved to your 401(k)

My takeaway: those affected lose a minor tax benefit, BUT are being done a favor to force Roth savings to their 401(k). This is a good thing overall, in my opinion, although your accountants might disagree! As always, happy to answer questions and opine on specific situations. Something to keep in mind for 2024.

This article from the Wall Street Journal goes into greater detail – click here to read: https://www.wsj.com/articles/retirement-tax-breaks-401k-contributions-2868ffdc?mod=article_inline

Liebmans’ Library

For this month, we chose a Wall Street Journal article about the increased trading in short-term options, including those that expire daily. We struggle to see how hedge funds and other professional investors will use these products productively, but that is not our central concern. For individual investors, we generally view these products as a tool for gambling, not investing. Allocating a significant amount of one’s net worth in daily options seems like a recipe for disaster. To quote Warren Buffet, “the stock market is designed to transfer money from the active to the patient.” Read the full article here: https://www.wsj.com/finance/stocks/options-individual-investors-risk-gambling-a97bee1a

Libby’s Quips & Quotes

“Individual commitment to a group effort – that is what makes a team work, a company work, a civilization work.” – Vince Lombardi