What Are Your Retirement Plan Contribution Limits in 2023?
Maximum annual contribution amounts for qualified retirement plans including 401(k)s, 403(b)s, IRAs, SIMPLE IRAs and SEP-IRAs are indexed to inflation, which rose significantly in 2022. That led to the Internal Revenue Service (IRS) announcing a record high increase in annual contribution limits for retirement plans in 2023. The IRS also expanded the income ranges used to determine who is eligible to make a deductible contribution to a traditional IRA or contribute to a Roth IRA. Below we look at what these changes could mean as you pursue your long-term financial goals.1
How much can you contribute to your employer plan?
Participants in employer plans can contribute $2,000 more to their plans next year, when the maximum contribution amount rises from $20,500 in 2022, to $22,500 in 2023. As the table below indicates, participants over age 50 can contribute an additional $7,500 in catch up contributions in 2023, for a total of $30,000 for the year.
How much can you contribute to an IRA?
Maximum IRA contribution amounts will increase by $500 next year. At the same time, the income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver's Credit have been expanded. However, since the IRA catch‑up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment, it remains unchanged at $1,000. Keep in mind, if you’re eligible to make an IRA contribution for tax-year 2022, you have until April 18, 2023, to do so.
4 ways maximizing contributions now can move you closer to your goals
If you have questions about these or other ways to optimize your retirement savings strategy, contact the office to schedule time to talk.
1 “Taxpayers should review the 401(k) and IRA limit increases for 2023.” IRS, November 21, 2022. https://www.irs.gov/newsroom/taxpayers-should-review-the-401k-and-ira-limit-increases-for-2023#:~:text=The%20amount%20individuals%20can%20contribute,also%20all%20increase%20for%202023.
This information was written by KRW Creative Concepts, a non-affiliate of the Broker/Dealer.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
Financial Watch | December 2022
December 29, 2022