Earlier today, the IRS released new contribution limits for retirement plans for 2023. Below is a summary of the changes for 2023.
401(k), 403(b), and Some 457 Plans
For 2023, the annual contribution limit for 401(k), 403(b), and some 457 retirement plans increases to $22,500. This is a $2,000 annual increase from $20,500 for 2022. The record amount of increase is due to the high rate of inflation.
The catch-up contribution, for those age 50 and over, increases from $6,500 in 2022 to $7,500 for 2023. Again, this is a larger increase than in previous years due to inflation. The catch-up contribution allows those age 50 and over to contribute up to $30,000 to their 401(k), 403(b), or (potentially) 457 retirement plan.
Traditional IRA and Roth IRA Retirement Plans
For 2023, the contribution limit for traditional IRAs and Roth IRAs increases to $6,500. The catch-up contribution, for those age 50 and over, remains at $1,000. Again, this is a larger increase than in previous years due to inflation. The catch-up contribution allows those age 50 and over to contribute up to $7,500 to their 401(k), 403(b), or (potentially) 457 retirement plan.
The phase-out range for whether or not a contribution to a traditional IRA can be deductible is also being increased to $73,000 to $83,000 for 2023 for single filers. In 2022, this amount was $68,000 to $78,000. This means that if you make more than $73,000, the amount of your traditional IRA contribution that is deductible is reduced for every $1,000 in income up to $83,000. If you make more than $83,000, then none of the contribution is deductible.
For couples married filing jointly, with one spouse as an active participant in their employer's retirement plan, the phase-out range for 2023 is $116,000 to $136,000 of combined income, which is an increase from $109,000 and $129,000. If the spouse is not an active participant in their employer's retirement plan, the deduction is phased-out with combined income between $218,000 and $228,000, which is an increase from $204,000 and $214,000.
For Roth IRA contributions, the phase-out for couples married filing jointly is now $218,000 to $228,000 for 2023, up from $204,000 and $214,000 in 2022. For single filers, the phase-out for 2023 will be $138,000 to $153,000. If your income is within those ranges, the amount that can be contributed to a Roth IRA is decreased for every $1,000 of income. If your income is above the higher amounts in those phase-out ranges then you are not able to contribute to a Roth IRA at all. However, there is currently still the possibility of completing a Roth conversion.
Financial Planning Opportunities
These new contribution limits offer some great opportunities for saving and investing for retirement, and also for tax savings in 2023. Escient Financial can help you set the right amounts for your 2023 contributions. Feel free to...
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