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10 Smartest Money Moves for 2023

Ring in the new year right with these tips

superimposed images show an up and down line chart of years, stacks of money and an illuminated lightbulb labeled 2023.
iStock / Getty Images

With 2023 just days away, could there be a more confusing time for investors? On one hand, the discussion is all about the upcoming recession — but is there actually going to be one? On the other hand, the discussion is also about the inflation monster, which has seriously impacted all of our wallets.

But are there signs that the monster is finally getting tamed, or is that just an illusion? In either case, what is the best way to prepare for spending and investing in the year ahead? AARP reached out to certified financial planners for tips on what older investors need to consider for the coming year. Here are their 10 best tips for 2023.

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1. Supersize your retirement plan contribution

If you are still working and have the cash flow, 2023 could be a terrific time to max out your tax deferrals, says Rachel Elson, a certified financial planner in San Francisco, California. Federal limits have jumped sharply, so with catch-up contributions, workers age 50 and up will be able to put $30,000 into workplace retirement plans like a 401(k) or 403(b).

You'll need to have sufficient income to allow this kind of saving because you could be tying up those dollars for several years, she says. But if you're in your peak earning stage — and especially if you're living in a high-tax state — the tax break from maximizing your deferrals can be meaningful.

2. Double-check charitable contributions

The one place that’s most obvious for tax deductions — charitable contributions — is also the place where many folks fail to get their full deductions, says Mitchell Kraus, a certified financial planner in Santa Monica, California. In reviewing his clients’ tax returns, Kraus discovered that most of them weren’t getting the full deduction from their charitable contributions because they either took the standard deduction or they were giving from the wrong pool of money.

More than 80 percent of Americans take the standard deduction, he says. There are other options. People over age 70½ can donate up to $100,000 from their IRA. (The contribution will not count as income.) Also, donating appreciated assets, such as stocks, might not create an extra deduction, but can avoid the capital gains taxes you would have to pay if you simply sold the asset, he notes.

3. Create a business owner retirement plan

More than 54 percent of America's small business owners are age 50 and over, according to the Service Corps of Retired Executives. Those who are self-employed can still have access to a retirement plan although many don’t realize it, says Marguerita M. Cheng, a certified financial planner in Gaithersburg, Maryland. The benefit to them is additional savings for retirement and tax savings either today or in the future. For those who have employees, the options include Simple IRA, SEP IRA or 401(k).

4. Invest in U.S. Treasury bills

Few investments offer the safety and security of U.S. Treasury bills, says Jordan Benold, a certified financial planner in Frisco, Texas. These are U.S. securities that mature in one year or less. Currently, a two- to six-month treasury bill will pay more than 4 percent, Jordan says.

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Treasury bills have several advantages. Since they mature so quickly, the investor doesn’t have to tie up money for a long time. Also, the principal can earn more money as the Fed increases rates to combat inflation. Benold says it is a smart idea to be investing in Treasury bills because they will likely continue to pay more if there are additional interest rate increases. You can buy them with no fee from Treasurydirect.gov.

5. Check your subscriptions 

Many folks (particularly older folks) tend to accumulate subscriptions that they do not use, says Jen Grant, a certified financial planner from Dallas, Texas. This is particularly true of streaming services that have gained popularity among all age groups, including Netflix, Hulu, HBO Max, Paramount, Peacock and Disney+. Take the time to figure out what you watch and where you watch it. You may find that you can consolidate your streaming on to just one or two platforms, she says.

It’s also smart to review things like smartphone service or Amazon Prime accounts. Many services are offering free access to other services. For example, she says, T-Mobile offers free access to Netflix, and Amazon Prime members get free access to GrubHub.

6. Check your lifestyle creep 

When you were just starting a family, you might have tried to save money by purchasing store brands at the grocery store and regularly using coupons. Somewhere along the way, you may have upgraded to the pricier name brands and even nixed the coupons. Maybe 2023 is the year to get back to the basics, says Grant. Also, consider gathering your friends together to take advantage of bulk buying through Sam’s Club and Costco. Many items are cheaper in bulk, but you have to have a plan to make sure it all gets used. One option is to make a list of items that you and your friends use, buy them in bulk and then split them up.

7. Make a Roth conversion  

With IRA and 401(k) balances depressed from market declines, 2023 will be a prime year for Roth conversions, says Rob Greenman, a certified financial planner in Portland, Oregon. This is especially beneficial for folks who haven't started drawing Social Security and aren't subject to required minimum distributions. You will have to pay income taxes on the amount you convert, but from a long-term perspective the pros of a Roth conversion in 2023 tilt the scales toward moving forward with this strategic move, he says.

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Judson Meinhart says that he’s encouraging clients ages 50 to 70 — particularly those who are retired — to consider Roth conversions. The certified financial planner in Winston-Salem, North Carolina, says that those with substantial assets sitting in IRAs and 401(k)s, will likely feel the tax impact when required minimum distributions begin. Since most asset prices have shrunk in 2022, he says, it’s the perfect opportunity to do a Roth conversion now and take advantage of a potential rebound inside a tax-free account.

8. Create a line of credit 

It’s always a smart idea to have a line of credit, particularly during economic uncertainty, says Bruce Colin, a certified financial planner in Rancho Palos Verdes, California. Ideally, it is to be used only in the event of a job loss or to fund an unexpected expense that might otherwise require you to sell an asset at a depressed price.

We are often advised to maintain sufficient cash reserves so that we can navigate unexpected expenses. While this remains a bedrock financial planning principle, not everyone is able to keep that much cash set aside for such a purpose, so access to a credit line can help provide a short-term safety net. But a credit line should never be used to fund a lifestyle that could not otherwise be afforded. The best credit line is one that is readily available if needed, but rarely if ever used, he says.

9. Open a high yield savings account

Your cash is losing value to inflation. Many investors worry about losing money in the stock market and forget about losing purchasing power due to inflation. Inflation is a real problem for those who want to be sure that their nest egg can get them through the rest of their lives. Recently, interest rates for high yield saving accounts are rising and there are many great options and rates available, some as high as 3 percent, says Katherine Edwards, a certified financial planner in Los Gatos, California. High yield savings accounts are a great place to store excess cash so that you can be confident that your money is fighting back against inflation, she says.

10. Put your head (partially) in the sand!

Yes, the market is sometimes scary, but don’t let news stories about the unpredictable economy scare you away from continuing to save and invest. When the stock market is going crazy and news reports are screaming that the sky is falling, Edwards advises that you stop listening and focus on what you can control: your behavior. Instead of listening to short-term fear, listen to the calm of your longer-term financial plan, she says. A lot of financial failures comes from reacting to the market instead of sticking to your plan. If you don't have a financial plan, she says, 2023 is the year to make one.

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