The holidays often are a time when families reflect on the past year or start thinking about their upcoming New Year's resolutions. "Whether from holiday overindulgence or remembering an unfinished summer task, in December and January many folks make plans for what they want to accomplish," said Ryan Stuart, a human sciences specialist in family wellbeing with Iowa State University Extension and Outreach.
It is also a great time to revisit financial plans and goals. "In addition to our own agendas, many tax benefits and other financial changes take effect on the first day of the year. These changes could have a significant impact on household finances," said Stuart, who also is an accredited financial counselor. Insurance premiums, tax withholding and cost of living increases are among the most common items to change at the beginning of each year.
"While these changes could negatively impact a family's budget, they can also create some flexibility to set new financial goals," Stuart said.
Something as simple as an adjustment to tax withholding could free up money toward a savings, retirement or debt reduction plan. For those heading into 2023 as a retiree, a larger than usual Social Security cost of living adjustment, often referred to as COLA, a slight decrease in Medicare premiums, and new Iowa tax laws could bring some relief to individuals on a fixed income.
According to the Social Security Administration, the average benefit will increase by approximately $140 per month starting January 1, 2023. In addition, the Centers for Medicare and Medicaid Services report a $5.20 per month decrease in premiums for most Medicare recipients.
While the impact of the new Iowa tax laws will depend on an individual household's circumstances, the savings for an average retiree on Social Security and Medicare will be approximately $150 per month. "The best way to put this money into action is by creating a plan," said Stuart.
If you are new to creating financial plans, the Consumer Financial Protection Bureau has free tools to help individuals with their goal planning. For example, "Setting SMART goals" is a tool for setting goals that are specific, measurable, achievable, relevant and time bound. The "My new money goal" worksheet can help you look at your budget and commit to a new saving plan.
ISU Extension and Outreach offers numerous resources for Iowans to start the new year on the right financial track. A free, confidential and unbiased one-on-one financial consultation with a family wellbeing specialist is one way to get started. The Volunteer Income Tax Assistance program can assist with many tax-related questions, and new personal finance topics are covered weekly on ISU Extension and Outreach's MoneyTip$ blog.
Categories: Iowa, Business