Contribution Limit Changes for 2023
The IRS recently announced retirement contribution limits for the 2023 tax year:
- Traditional IRA / Roth IRA: $6,500 — Catch-up (for age 50+): $1,000.
- Simple IRA: $15,500 + match — Catch-up (for age 50+): $3,500.
- 401(k): $22,500 salary deferral — Catch-up (for age 50+): $7,500. All-in limit (salary deferral + employer contributions): $66,000 or $73,500 for 50+.
- SEP IRA: Lesser of $66,000 or 25% of compensation.
- Max salary considered for matching contributions: $330k.
- Income phase out for Roth IRA contribution begins at $138k for single & $218k for married filing jointly.
- HSA: $3,850 for single & $7,750 for family + $1,000 for each family participant above age 50.
Tilia Welcomes New Investment Research Associate
This fall we were fortunate to add Dustin Hudspeth to the team as an Investment Research Associate. Dustin served 5 years in the Marine Corps and is now pursuing dual degrees in Finance & Accounting at UNCW when he's not working alongside us at Tilia. Dustin has a real passion for investing & we're happy to have him on the team.
Markets are Awash in Opportunities
The bear market of 2022 has been painful for investors across the board. While the light at the end of the tunnel may still seem far off, the seeds of the next bull market are starting to germinate.
The epicenter of this year's carnage has been bonds & technology stocks. Both areas look poised to deliver strong returns to investors willing to raise their sights beyond the short-term.
For the risk-averse investor, corporate bonds are offering the highest yields since 2008, with investment-grade corporate bonds offering yields of 5 – 6% until maturity in the 3 – 10 year range. With the potential end of the Federal Reserve's rate increases now in sight, locking in these rates on medium-term corporate bonds seems like a smart move.
Investors willing to endure short-term volatility in stocks may have even stronger returns in their future. According to noted NYU professor Aswath Damodaran's valuation work, expected long-term returns for large U.S. stocks rose to 9.53% on November 1st, from just 5.75% on January 1st.
The upshot is that while short-term economic prospects continue to look shaky, the outlook is bright for long-term investors.
A Little Dose of Optimism
Inflation has been the major driver of market weakness this year, and rising prices ranked among the top issues on voters' minds in the recent mid-term elections. Recently, inflation watchers have a few good reasons to feel more optimistic:
- Supply chain bottlenecks have been a major inflationary pressure since the summer of 2020. One of the most visible signs of this was the long queue of container ships waiting outside of the world’s largest ports. In January of 2022, there were 109 ships waiting to unload outside of the ports of Los Angeles & Long Beach. In late October, that number dropped to 4 ships. The global container freight rate index has fallen 70% from the highs of September 2021.
- Shipping costs have eased dramatically, reducing the cost of imported goods that pushed prices higher throughout 2021 and 2022.
- Apartment rents have started to roll over after a multi-year surge, removing a meaningful contributor to CPI inflation.
- European natural gas inventories are well above seasonal norms, taking pressure off of energy prices heading into the winter.
- Despite ongoing geopolitical conflict, the global economy has continued to adapt and grow, suggesting that supply can flex to meet demand.
The picture is far from perfect, but it is meaningfully better than it was a year ago. As always, we will continue to monitor these trends and adjust your portfolio as conditions evolve.