The new year is approaching! If you haven’t ventured out yet to start your own practice yet and are still working for an employer that offers a defined contribution retirement plan such as a 401k, then I have good news for you: The IRS has increased the upper limit that you can contribute. Additionally, if you are already a nurse practitioner entrepreneur, then you can contribute even more into your self-employed IRA/401k
Starting in 2023, employees are now allowed to save up to:
- $22,500 if they’re under the age 50
- $30,000 if they’re age 50 or older
Guess how much self-employed nurse practitioners can contribute? $66,000! Another reason why being a business owner is the fast path to wealth and financial freedom.
Regardless, this should come as no surprise thanks to inflation. Every year, the IRS reviews cost of living increases and makes changes to their contribution and income limit rules for all plans across the board – not just 401ks. Given that inflation was stubbornly high over 8 percent for most of 2022, this increase seemed inevitable.
I highly encourage everyone to contribute to their tax-advantaged retirement plans as much as possible – maxing them if you can. What’s incredible about them is that every dollar you save is around 25 cents less you don’t have to pay in taxes. When we’re talking about tens of thousands of dollars, that’s some pretty substantial savings. Therefore, it just makes good sense to stuff these accounts as much as possible so that you can optimize the tax savings. This is just one of a multitude of tax saving strategies everyone should be using.
Remember too that these accounts are per person. So if you’re married to someone who also has a 401k plan, then you can essentially double your household savings to $45,000.
Even if you don’t plan on retiring any time soon, it’s a good idea to get in the habit of always increasing your contributions. Not only will this aid in keeping your lifestyle expenses at bay, but you never know when you might need this money in the future. You may wish to borrow against it or use a portion for a rental property or other business opportunities. However, you won’t have these opportunities unless you start building your own personal bank now. So do yourself a favor – increase those contributions for the year and inch your way closer to financial freedom.