Federal Retirement Numbers To Know In 2023

Retirement is a major milestone in the lives of many people, and for federal employees, knowing the right set of numbers is essential to making smart decisions. 

As 2023 gains traction, federal employees and other government personnel should take note of a few key retirement numbers that can help them plan their finances and ensure they have enough saved when they leave the workplace. 

In this guide, we’ll look at some of the important retirement numbers that federal employees need to know this year. 

Federal Retirement: Get Ahead of the Curve

Whether you’re a current federal employee or planning to join the federal workforce soon, understanding these numbers is crucial for retirement planning.

Cost of Living Adjustment 

One important number to keep in mind is the Cost-of-Living Adjustment (COLA) for retirees. The COLA is an annual adjustment made to Social Security and other government benefit payments to account for inflation. 

One major benefit of a COLA is that it helps to protect retirees’ purchasing power by keeping their Social Security benefits adjusted for inflation. Retirees who rely heavily on these benefits may struggle financially if they do not receive regular COLAs. Similarly, employees with fixed incomes can also feel the pinch when prices increase without a corresponding rise in wages or benefits.

Social Security benefits and Supplemental Security Income (SSI) payments will increase by 8.7% this year for 2023.  

Thrift Savings Plan 

The Thrift Savings Plan (TSP) is a retirement savings plan designed for federal employees, including members of the uniformed services. It was established in 1986 as part of the Federal Employee Retirement System (FERS). The TSP offers participants an opportunity to save money for their retirement with tax-deferred contributions.

In 2023, the Internal Revenue Service announced that the elective deferral limit for TSPs will increase to $22,500 a year.

Further, the TSP catch-up limit is $7,500 for 2023. These catch-up contributions can be made if you are age 50 or older. 

IRA and Roth IRA 

For 2023, the IRA and Roth IRA contribution limit is $6,500 and the catch-up contribution is $1,000 if you are age 50 or older. 

Health Savings Account Limits

If you are a federal employee with a health savings account (HSA) the new contribution limits for 2023 are:

• $3,850 for a single person
• $7,750 for a married couple
• $1,000 catch-up contribution

Retired Minimum Distribution 

The Required Minimum Distribution (RMD) is a term that often comes up in discussions about retirement accounts. Simply put, the RMD is the amount of money that retirees must withdraw from their tax-deferred retirement accounts every year after they turn a certain age. For 2023, the RMD has been raised to the age of 73 from 72. This means that once you reach this age, you are required by law to withdraw a certain proportion of your account balance annually.

The RMD applies to several types of retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored plans such as 401(k)s and 403(b)s. The exact amount you need to withdraw depends on factors such as your life expectancy and account balance at the end of the previous year. Failing to take out the required minimum can result in hefty penalties from the IRS.

Standard Deduction on Taxes 

In 2023, the standard deduction for taxes will depend on a variety of factors. These include your filing status, age, and whether you are blind. For example, if you are single and under the age of 65, your standard deduction will be $13,850. However, if you are married and filing jointly with your spouse who is also under 65 years old, then your combined standard deduction will be $27,700.

It’s important to note that the standard deduction can change from year to year due to inflation adjustments. This means that it may be different in 2024 than it is in 2023. Additionally, some taxpayers may choose to itemize their deductions instead of taking the standard deduction if they believe they can claim more deductions this way.

Read More > Can Federal Employees Realistically Retire in their 50s?

Contact the Federal Educators 

The federal retirement process can be complex and it’s important to have access to accurate information from knowledgeable sources. At Federal Educators we strive to be a great resource for understanding how to plan for retirement, as well as learning about available benefits and options. 

Don’t hesitate to contact us at (813)755-7037 if you have any questions or to receive a retirement benefit analysis. After all, a secure future is something we all strive for.