Podcast Episode - Suze School: How To Calculate Your Roth IRA Contributions for 2023


IRA, Retirement, Roth, Roth IRA


November 27, 2022

Listen to Podcast Episode

Today’s episode is a Suze School packed with everything you need to know about the changes to contribution limits in Roth IRAs and how you can calculate the changes in modified adjusted gross income to be able to contribute to your Roth IRA.


Podcast Transcript:

00:00:34

Suze: November 27th, 2022. Welcome everybody, Suze O here... to the Women & Money podcast, as well as everybody smart enough to listen. Well, how was it? Did you get through Thanksgiving? Did you try my stuffing?

00:00:54

Suze: You have to admit, my stuffing is the greatest stuffing you will ever eat. I really believe that. And for those of you who missed out on my stuffing recipe, it was on the Women & Money app. Which all of you by the way, should absolutely be downloading, by going to Google play, or Apple app. Search for Women & Money or Suze Orman, up comes the app, it's free, download it.

00:01:24

Suze: The reason you should download it, and go to it, is because, it is there that I'm now going to start giving updates on what I think is happening in the stock market, or if I want you to know something right away, and it's in between podcast days. That's number one. Number two, it is there,

00:01:48

Suze: that not only that you can ask a question, you could search past podcasts, but if you go there under Suze Shop,

00:02:00

Suze: if you purchase one of those items that maybe you want, these are books, programs, all kinds of things, you get a 50% discount than anywhere else if you were to buy them. All right, everybody. But most importantly for right now. Because we are after Thanksgiving. We had such a great time by the way. But anyway.

00:02:28

Suze: We're after Thanksgiving, and so part of the Suze Shop participation in Black Friday and all of you wanting to get things that you really need, is that on the Women & Money app

00:02:43

Suze: under Suze Shop, if you go down just three items, you will see that we are offering the gold box that so many of you have requested. Now years ago, we sold that gold box on HSN.

00:03:02

Suze: And then we stopped going to HSN because of the pandemic things like that, and we put the gold box away. And we only have 700 of them left.

00:03:15

Suze: So not nearly enough to go back on HSN with it, but so many of you have been wanting to purchase it. So here's the scoop everybody. You can go to SuzeOrman.com and look at it on my own website, and you'll see that it's for sale for $250. On the Women & Money app, it's $125.

00:03:40

Suze: And if you are interested at all in getting the must have documents, which is $2500 worth a state of the art documents that are good in all 50 states, created by my own trust lawyer, they are my documents, KT's documents. You can use them over and over again, you can share them with friends and family members, that's part of the gold box.

00:04:09

Suze: But the gold box is also a file. It's made out of the same material that fire people's helmets are made out of, so it is water resistant, and within that gold box, I call it the grab and go box, is a file folder system that I own the patent on, that gives you 10 file folders of the most important areas of your life.

00:04:37

Suze: And everything that you need to do in those 10 most important areas. So not only do you get them must have documents that you could get right now by the way for $99,

00:04:49

Suze: but essentially for $25 more, are you kidding me? You can get the must have documents, the gold box, you can get the personal finance course, you get 10 books that live online that go with the 10 file folders that are in there, you get the do’s and don't cards, you get the insurance evaluator, the and the debt eliminator. I don't know,

00:05:13

Suze: if this is something that you have wanted, and you've been waiting for it to come back, it is here for you now. Don't miss it.

00:05:23

Suze: That's what you can get on the Women & Money app. I just did a little spur of the moment infomercial for my gold box.

00:05:33

Suze: Because hopefully it will be your gold box because you should want that. Anyway. Okay

00:05:41

Suze: Suze School. Today,

00:05:44

Suze: I want to talk about two things. The changes in the contribution limits to your IRAs and your employer sponsored plans, as well as the changes in modified adjusted gross income limits to qualify for a ROTH IRA for the year 2023.

00:06:08

Suze: So are we ready? Is your little Suze notebook out? Because you are seriously going to need to take notes on this one. There are a lot of numbers here. So get ready to write them down.

00:06:25

Suze: Alright. First, let's talk about the changes in the contribution limits to an IRA,  a ROTH IRA, and an employer sponsored plan, which would be a 401k, a 403b, a TSP.

00:06:46

Suze: Let's talk about the contribution limits for 2023,

00:06:53

Suze: and what they are going to be. In 2023,

00:06:59

Suze: if you are under 50 years of age, you are going to be able to put $6,500 in a traditional IRA or a Roth RA. And that is up from $6,000 this year. Okay everybody? Next, if you are 50 or older

00:07:25

Suze: in the year 2023 which is just a few days from now, you're going to be able to put $7500 into a Roth or traditional IRA, and that is up from $7,000 this year.

00:07:45

Suze: Now. Remember, you have until April 17th of next year. And that is because April 15 falls on a Saturday, but you have till April 17th of next year

00:08:01

Suze: to open and fund a Roth for 2022. So you don't have to do any of this right away everybody. You absolutely can wait if you want until April 17th of next year.

00:08:19

Suze: You also if you want, can open up your Roth IRA any time next year for 2023. So you actually could fund both if you wanted to in 2023.

00:08:34

Suze: Those are the limits that you now need to know for a Roth, which is after tax contributions, or traditional, which is pretax contributions for your IRAs. Now what is important, is that you need to understand that if you open up a traditional IRA, you open up also a Roth IRA,

00:09:00

Suze: the most that you can put in between the two of them is $7,000 this year if you're over 50, actually $6,000 if you're under 50, or next year, like I said, it will be 6500 and 7500 the most you can put in,

00:09:21

Suze: you cannot put in for instance this year 7000 in a traditional IRA if you're 50 or over and $7000 in a Roth IRA. You can't do that, it's a combination of both, if you want to combine both. Okay.

00:09:41

Suze: Next, let's talk about the contribution limits for employer sponsored retirement plans such as 401ks, 403bs, and TSPs.

00:09:56

Suze: The maximum next year, if you are under 50, is $22,500.

00:10:07

Suze: And that's up from $20,500 this year.

00:10:14

Suze: Next year, if you are 50 or older,

00:10:19

Suze: the maximum that you can put in is $30,000. So there's a $7,500 catch up there. So $30,000,

00:10:32

Suze: which is up from $27,000 maximum this year.

00:10:38

Suze: Now.

00:10:40

Suze: There are other changes that will affect you, but I just want to talk about these increases for a second.

00:10:49

Suze: Who is really going to be able to benefit from those increases? Because that's a lot of money to put $30,000 max into a 401k, if you're 50 or older. Or to put $7500 in a traditional or a Roth IRA if you're 50 or older starting next year.

00:11:12

Suze: Probably people who already have a whole lot of money to tell you the truth.

00:11:18

Suze: So a lot of these changes, which I find very sad by the way, really benefit those who are earning more money.

00:11:30

Suze: So that doesn't mean however if you're earning less money that you just shouldn't participate, you should still try to put as much money, especially into a Roth, whether it's a Roth at your employer's, or your own Roth IRA . And by the way you can have both, you can max out a Roth 401k, as well as a Roth IRA.

00:11:57

Suze: So you could essentially, if you were 50 or older, you could put in a Roth $37,500, 7500 in your Roth IRA, 30,000 in your Roth or a combination there. That's a lot of money.

00:12:15

Suze: But for those of you who are lower wage earners, doesn't mean that you can't try to put as much money in as possible.

00:12:26

Suze: The next change is about the modified adjusted gross income limits for a Roth. All of you are aware that a Roth IRA, remember there are no income limits to do a Roth 401k, 403b, or TSP.

00:12:47

Suze: There are modified adjusted gross income limits to do a contributory Roth. That is where you every year, contribute money to a Roth IRA. And we just went over what those maximum contribution limits are.

00:13:08

Suze: There is no income limit at all to convert

00:13:14

Suze: from a traditional IRA to a Roth IRA. There are only income limits that we're talking about right now, is to qualify for a contributory Roth IRA. The amounts are as follows. If you are single,

00:13:37

Suze: and you want to qualify for the maximum contribution into a Roth IRA, which we already have said

00:13:46

00:14:13

Suze: the modified adjusted gross income for 2023 increased to $138,000 from $129,000 this year. If you are married finally jointly,

00:14:34

Suze: and want to contribute the max,

00:14:37

Suze: then for 2023,

00:14:41

Suze: the modified adjusted gross income is at $218,000, and that's up from $204,000 this year.

00:14:52

Suze: Now what's interesting about that, is for some reason,

00:14:58

Suze: all of you think once you make more than those amounts that I just said, a modified adjusted gross income,

00:15:09

Suze: that you don't really qualify anymore for a Roth. 00:15:13

Suze: And that is not true.

00:15:15

Suze: You still can qualify for a Roth,

00:15:20

Suze: but maybe not be allowed to put in the maximum amount that is allowed. Which again is 6 to $7000 depending on age this year, 6500 to $7500 depending on age next year.

00:15:38

Suze: However, if you were to make over those amounts,

00:15:44

Suze: you still can contribute.

00:15:46

Suze: But the amount you can contribute as I just said, will go down. And once you earn over a specific amount of money, you no longer can contribute at all. So these are numbers now that you need to write down. If you are single

00:16:09

Suze: in the year 2023,

00:16:13

Suze: once you make over $153,000 of modified adjusted gross income, you no longer qualify for a Roth IRA . That is up from 144,000 modified adjusted gross income this year. If you are married finally jointly,

00:16:37

Suze: if you make over $228,000 a modified adjusted gross income in 2023, you no longer qualify for a Roth IRA. But that's up from 214,000 this year.

00:16:54

Suze: Again, if you are married filing single, you cannot earn over $10,000 and qualify for a Roth IRA. Now here's where I want you to listen to me.

00:17:08

Suze: Because you need to know once you earn over the amount that allows you to contribute the maximum, but under the amount that disqualifies you from a Roth IRA all together, you don't know how to figure out how much can you put into a Roth IRA.

00:17:35

Suze: Am I making sense to you? So I am going to teach you right now how to do it.

00:17:43

Suze: So let's assume you are over 50 years of age. And let's also assume that you are single.

00:17:51

Suze: And in this year, 2022, the max allowed to be put into a Roth IRA, if you are 50 or older is $7000.

00:18:09

Suze: Again. The modified adjusted gross income for a single this year is 129,000 to put in the max. Under that, once you've put in 144,000, you no longer qualify.

00:18:24

Suze: Let's assume you make however $135,000 a year of modified adjusted gross income.

00:18:35

Suze: So the question is, your over the 129 to put in the max,

00:18:42

Suze: but you're under the 144 that disqualifies you from a Roth IRA. How much can you contribute to your Roth IRA?

00:18:54

Suze: Here's how you do it.

00:18:57

Suze: You subtract your modified adjusted gross income,

00:19:02

Suze: in this case it was $135,000 from the upper limit that disqualifies you from a Roth IRA. For 2022, that's 144,000.

00:19:20

Suze: So if you subtract your 135,000 from 144,000, that leaves you $9000.

00:19:33

Suze: Now.

00:19:35

Suze: You also have to know, what is the difference between the amount of money that you can make to contribute the most, which is $129,000, and $144,000.

00:19:56

Suze: So you then need to subtract the 129,000 from the 144,000, and that gives you $15,000. So there's two calculations that you have to make.

00:20:15

Suze: The first is you take your modified adjusted gross income, and subtract it from the upper limit of when you get disqualified from a Roth IRA. Which in this case for this year is $144,000 if you're single.

00:20:36

Suze: You then have to subtract the upper level from the lower level, which is 144,000 and 129,000 from each other, which gives you 15,000.

00:20:52

Suze: You then divide, you can do this people, your $9,000 difference,

00:21:01

Suze: by the $15,000 difference.

00:21:06

Suze: And that comes out to be 60%.

00:21:11

Suze: You then would be allowed

00:21:15

Suze: to put in 60%

00:21:18

Suze: of the maximum amount this year, which for you would be $7000, because you're 50 or older. So 60% of $7000 is $4200. And that is the amount that you can put in to a Roth.

00:21:39

Suze: Do you want me to go over it one more time? Because these are numbers you need to know how to calculate.

00:21:47

Suze: One more time. Let's just assume

00:21:52

Suze: that you are married filing jointly this time.

00:21:56

Suze: And this year you are going to make $207,000 of modified adjusted gross income between you and your spouse.

00:22:09

Suze: The upper modified adjusted gross income this year to contribute the max is $214,000.

00:22:21

Suze: You subtract your $207,000 from the 214,000 which is the upper limit that gives you $7,000.

00:22:35

Suze: You then subtract the lower limit,

00:22:39

Suze: which is 204,000 to be able to contribute the max, the 204,000 from the 214,000 upper limit, that gives you the number of 10,000,

00:22:54

Suze: you then divide 7000,

00:22:58

Suze: the difference between your modified adjusted gross income and the upper limit,

00:23:03

Suze: that, your 7000 by 10,000,

00:23:09

Suze: and that gives you 70%.

00:23:13

Suze: And the maximum that you can put in, because you are 50 or older, is $7,000 this year.

00:23:23

Suze: And 70% of $7,000 is $4,900. So $4,900 is the maximum that you could put in this year.  

00:23:39

Suze: You need to listen to that over and over again. Those calculations are really really simple.

00:23:46

Suze: So now you know

00:23:49

Suze: the difference of how to calculate that.

00:23:54

Suze: Now one last thing before I end. Because I know your mind is just swimming with numbers, so I'm not going to give you any other Suze School today, because that is what I wanted you to know,

00:24:09

Suze: is this.

00:24:12

Suze: We are 19 days away everybody,

00:24:17

Suze: from today, for you to be able to get extra entries into the Suze Holiday sweepstakes with Alliant Credit Union, where we are giving away to $10,000 prizes, directly into your Alliant Credit Union account.

00:24:39

Suze: All of you should have gotten an email that also gives you a link in that email, that allows you to send that link to family members and friends, and if they open up an Alliant Credit Union account,

00:24:55

Suze: they get entered into the sweepstakes automatically, and you get an extra entry. Obviously if you're already a member of Alliant Credit Union, you are automatically entered into the sweepstakes. But if you want extra entries, that's how you get them. For those of you however, who maybe didn't get the email or it went into your junk mail or you missed it,

00:25:21

Suze: you would go to my Alliant, A-L-L-I-A-N-T dot com slash Suze, and that is where you would get your personalized link. However, if you're not exactly sure what we're talking about here,

00:25:39

Suze: you would go to my Alliant, A-L-L-I-A-N-T dot com,

00:25:45

Suze: and become a member of the Alliant Credit Union. Sign up for the Ultimate Opportunity Savings account, where you'll be making right now 2.5% plus $100 bonus. If you put $100 a month in every month for 12 consecutive months, you're automatically entered into the sweepstakes and then you will get a link

00:26:06

Suze: to give out to your friends and family members, and also get extra entries. So 19 days left, peeps. After that, this is over. Who wouldn't want to win $10,000? I don't know,

00:26:25

Suze: if you ask me, every single one of you should want to do that. All right. This was just a small Suze School, because I'm sure you're having trouble digesting still the Turkey leftovers. You know what I love more than actually the turkey dinner and everything that goes with it? The next day, do you not love cold turkey sandwiches with mayonnaise and lettuce? I love that.

00:26:55

Suze: I love it. So that's my favorite thing. And I'm going to get one right now. Alright. Until Thursday, when Miss Travis joins us again with Ask KT and Suze Anything, there's really only one thing that I want you to know when it comes to you and your money. And that is for all of you to be smart,

00:27:20

Suze: strong and secure. Now you stay safe. Bye bye, everybody.


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