These Are Suze Orman's Retirement Do's and Don'ts for 2023 (2024)

FAQs

What are the new retirement account rules for 2023? ›

In 2023, you can contribute an additional $7,500 per year if you are age 50 or older. Under new rules, if you're ages 60, 61, 62 or 63, you can make an additional catch-up contribution of $10,000 or 50% more than your regular catch-up contribution (whichever is greater).

Many retirement experts project that you need somewhere between 80-90 percent of your pre-retirement income to sustain your retirement lifestyle. For many, this can equate to roughly $1 million, which seems like a tricky number to achieve.

In 2023, Americans will be able to contribute more money to their 401(k)s than at any point in the last 30 years. The maximum contribution limit for 401(k)s increases from $20,500 in 2022 to $22,500 in 2023—the highest since 1985. This means that Americans can save more money for retirement than ever before.

The “4% rule” is a common approach to resolving that. The rule works just like it sounds: Limit annual withdrawals from your retirement accounts to 4% of the total balance in any given year. This means that if you retire with $1 million saved, you'd take out $40,000 the first year.

If you will reach full retirement age in 2023, the limit on your earnings for the months before full retirement age is $56,520. Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.

Among the biggest mistakes retirees make is not adjusting their expenses to their new budget in retirement. Those who have worked for many years need to realize that dining out, clothing and entertainment expenses should be reduced because they are no longer earning the same amount of money as they were while working.

Putting Off Saving for Retirement

The single biggest financial regret of Americans surveyed by Bankrate was waiting too long to start saving for retirement. Not surprisingly, respondents 50 and older expressed this regret at a much higher rate than younger respondents.

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month. 75 and older: $43,217 per year or $3,601 per month.

How much does the average retired person live on per month? ›

People ages 65 and older had an average income of $55,335 in 2021. Average annual expenses for people ages 65 and older totaled $52,141 in 2021. 48% of retirees surveyed reported spending less than $2,000 a month in 2022. 1 in 3 retirees reported spending between $2,000 and $3,999 per month.

One FERS date, June 30, is not only at the end of the month, but also the end of a leave period. This is a particularly good date, because it allows for one last accumulation of annual leave to create a larger lump sum payout.

Get more aggressive

If you have a long time until you retire, you're probably going to be better off having a portfolio that's more aggressive. That means your portfolio will likely have more stocks in it and fewer fixed-income investments such as bonds and CDs.

Key Points. The 401(k) contribution limit for 2023 is $22,500. Workers 50 and older can contribute an extra $7,500. Maxing out a 401(k) may not be ideal if you don't have an emergency fund, you're in debt, or you'll need your money soon.

Unfortunately, a stock market crash is likely to result in major declines in your 401(k) account balance, at least short term. How can I avoid losing money from my 401(k)? The best way to avoid losing money in your 401(k) — especially during a recession — is to avoid selling off all your investments.

According to the Social Security Administration (SSA), the average monthly retirement benefit for Security Security recipients is $1,781.63 as of February. Several factors can drag that average up or down, but you have the most control over the biggest variable of all — the age that you decide to cash in.

In fact, statistically, around 10% of retirees have $1 million or more in savings.

Fidelity recommends people save about 10 times their annual income at retirement age to have enough money to sustain them for the rest of their lives. But this estimate is based on several assumptions, including: You plan to retire and claim Social Security at 67.

To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.

Although their earnings for the year substantially exceed the 2023 annual limit ($21,240), they will receive a Social Security payment for November and December. This is because their earnings in those months are $1,770 or less, the monthly limit for people younger than full retirement age.

What will my Social Security check look like in 2023? ›

The latest such increase, 8.7 percent, becomes effective January 2023. The monthly maximum Federal amounts for 2023 are $914 for an eligible individual, $1,371 for an eligible individual with an eligible spouse, and $458 for an essential person.

The Bottom Line

The worst retirement mistakes are probably not planning to retire at all, failing to take full advantage of retirement savings plans, mismanaging Social Security, making poor investment decisions and neglecting the non-financial side of retirement.

Diversifying Investment Vehicles

Most retirees never regret planning ahead for retirement to meet their goals and investing early to reap the benefits of compound interest. Another money move retirees seldom regret is diversifying their savings and investment vehicles.

The first is the rule of 25: You should have 25 times your planned annual spending saved before you retire. That means that if you plan to spend $30,000 during your first year in retirement, you should have $750,000 invested when you walk away from your desk.

And about 15% of seniors end up regretting retiring earlier than they expected, according to a recent survey by Clever Real Estate. Here are three reasons why. Image source: Getty Images.

50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.

The finding echoes a few others, the New York Times reports: “An analysis in the United States found about seven years of retirement can be as good for health as reducing the chance of getting a serious disease (like diabetes or heart conditions) by 20 percent.

Can you live on 3000 a month in retirement? ›

If you have a low living cost and can supplement your income with a part-time job or a generous pension, then retiring on $3,000 a month is certainly possible.

The Federal Reserve's most recent data reveals that the average American has $65,000 in retirement savings. By their retirement age, the average is estimated to be $255,200.

How much do I need to save to retire? A good rule of thumb is that your retirement income should equal about 80% of your pre-retirement income, says Steve Sexton, financial consultant and CEO of Sexton Advisory Group, a retirement-planning company.

Make no mistake, I think 2023 will be a solid year for retirees. Social Security benefits are way up, Medicare premiums are falling, and hopefully, inflation will keep falling. But after a year during which inflation topped out at over 9% and Medicare premiums shot up, there's still a lot to make up for.

The average monthly retirement income adjusted for inflation in 2023 is $4,381.25, according to a 2022 U.S. Census Bureau report. The average annual income for adults 65 and older in 2023 is $75,254 – or $83,085 when adjusted for inflation.

Rather, Alabama is the most affordable state to retire in, according to WalletHub's “2023 Best States to Retire.” The analysis compared all 50 states across three key categories: health care, quality of life and affordability.

Social Security benefits and Supplemental Security Income (SSI) payments will increase by 8.7% in 2023. This is the annual cost-of-living adjustment (COLA) required by law. The increase will begin with benefits that Social Security beneficiaries receive in January 2023.

Most of our experts agree that one of the safest places to keep your money is in a savings account insured by the Federal Deposit Insurance Corporation (FDIC). “High-yield savings accounts are an excellent option for those looking to keep their retirement savings safe.

What should a 70 year old retiree asset allocation be? ›

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

Seniors should consider investing their money for several reasons: Generate Income: Investing in income-generating assets, such as stocks, bonds, or real estate, can provide a steady income stream during retirement. This can be especially important for seniors who no longer receive a regular paycheck from work.

Effective January 1, 2023, the age at which minimum distributions must begin is now 73. In ten years, it will go up again to age 75. The penalties for failing to take the required minimum distributions are cut in half in 2023 – and reduced further if the mistake is corrected promptly.

In 2023, you can contribute an additional $7,500 per year if you are age 50 or older. Under new rules, if you're ages 60, 61, 62 or 63, you can make an additional catch-up contribution of $10,000 or 50% more than your regular catch-up contribution (whichever is greater).

The IRS's 401(k) contribution increase in 2023 is a big deal. The agency recently announced an increase in the pre-tax 401(k) limit—employees can now contribute up to $22,500 of their salary towards retirement accounts each year. This is a nearly 10% increase from the previous year's limit of $20,500.

Key Takeaways

If your 401(k) is losing money, consider how much time you have before you plan to retire. If you're closer to retirement, you may want to talk to a benefits manager or contact the brokerage to see if you can reallocate your portfolio so that it's invested in less risky stocks.

Diversification is the hallmark of any good investment portfolio, especially for long-term accounts like 401(k)s. Diversifying your portfolio across different asset classes and markets also helps to reduce exposure to one particular segment of the market during market downturns.

There have been no recent changes to the retirement age and there will be none later in 2023, either. The Social Security Amendments of 1983 contained two provisions that impact when someone decides to retire, according to the SSA.

Key Takeaways. Social Security recipients will get an 8.7% raise for 2023, compared with the 5.9% increase that beneficiaries received in 2022. Maximum earnings subject to the Social Security tax also went up, from $147,000 to $160,200.

Will Social Security get a in 2023? ›

Social Security benefits and Supplemental Security Income (SSI) payments will increase by 8.7% in 2023. This is the annual cost-of-living adjustment (COLA) required by law. The increase will begin with benefits that Social Security beneficiaries receive in January 2023.

The most impactful change in 2023 is the 8.7% cost of living adjustment, or COLA, which takes effect this month. For instance, if you receive $2,000 a month from Social Security, the monthly payout will rise to $2,174 per month.

Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 8.7 percent in 2023.