3 Things that Will Help to Alleviate the Pain of High Inflation
It’s expensive for your wallet. It is detrimental to your savings because it reduces the purchasing power of the dollars you have set aside.
And it’s tough on your paycheck because chances are your last raise did not keep up with headline inflation, which is currently 8.2% according to the most recent reading.
However, the same high inflation has resulted in a couple of changes that may provide you with some relief. Every little bit counts.
Beginning next year, your paycheck may be slightly larger due to inflation adjustments made by the Internal Revenue Service to 2023 federal income tax brackets and other provisions.
1. Your take-home pay could increase next year.
The net result of those changes is that more of your wages in 2023 will be subject to lower tax rates than they were this year. You may also be able to deduct a larger portion of your income.
2. You can lower your taxable income… and set aside more money for the future
You can reduce your taxable income by saving money in a tax-deferred workplace retirement plan, such as a 401(k) or 403(b) because you get a deduction for your contribution the year you make it.
The more you save, the lower your tax bill will be.
You will be able to contribute up to $22,500 to your 401(k), 403(b), most 457 plans, or the Thrift Savings Plan for federal employees beginning next year.
3. Your Social Security payments will be increased.
The annual cost-of-living adjustment for Social Security recipients will be 8.7% next year, the highest increase since 1981.
The increase will raise retirees’ monthly payments by $146, to an estimated $1,827 in 2023.
No one will be able to live comfortably on that amount, but the extra money will help to offset some of the higher prices for everyday necessities that seniors face.