retirement savings golden nest egg picture

3 Ways Inflation Can Be Good For Your Savings

October 24, 2022
Krista EberlyBy Krista Eberly, CFP®, CIMA®
Investment Management Officer

Inflation is the number one topic this year. Why? We haven’t seen inflation this high and persistent in more than 40 years. It is affecting households, businesses, and financial markets — both here and abroad. However, there are positives that come with higher inflation.

1) Social Security benefits are on the rise.

One positive is that retirees currently collecting Social Security benefits will see an 8.7% increase in 2023, the highest annual increase since 1981. Along those same lines, retirement plan contribution limits for 2023 show the largest dollar and percentage increases ever, according to the Wall Street Journal. 

2) You can take advantage of increased retirement contribution caps.

The Internal Revenue Code (IRS) on Friday unveiled how much one can contribute into various retirement accounts for next year. For 401(k) plans, an employee will now be able to contribute up to $22,500 in 2023, up from $20,500 this year. If you are 50 years or older, you can contribute an additional $7,500 as well, a $1,000 increase from current levels. These limits also apply to 403(b) s and most 457 plans.

If you do not currently have access to an employer sponsored retirement plan, you can take advantage of the inflation-adjusted increases in an Individual Retirement Account (IRA). For 2023, one can contribute $6,500 into an IRA, a $1,000 increase. This is the first time annual IRA limits increased since 2019. If you are 50 years or older, you can contribute an additional $1,000. This catch up is not inflation adjusted; therefore, it remains unchanged from current limits.

3) You have higher potential market value growth.

These changes noted above apply to the Roth option for both 401(k) s and IRAs as well. These illustrate that high inflation is not always a bad thing. It creates a great opportunity for individuals saving for retirement. In addition, contributing more into your retirement account during a market downturn — or “buying low” — will potentially enhance your market value growth over time. This is a positive for retirement savings during a difficult time.

Contribution increases for next year create a great opportunity for you to review your current retirement savings plan to see if/how you can take advantage of the various changes. This is where we can help. Please contact us today and let’s review your current retirement plan. Your successful retirement matters to us.

About the Author

Krista Biernbaum, CFP®, CIMA®

Krista Biernbaum is an Investment Management Officer within the Security National Wealth Management division. As an Investment Management Officer, she manages client portfolios, analyzes securities and performs daily trading activities. A Certified Financial Planner (CFP®) and Certified Investment Management Analyst (CIMA®), Krista holds a Bachelor of Science degree in mathematics from Wayne State College.