It’s no secret that saving for retirement can be a challenge. Between the rising cost of living and the uncertainty of the future, it can be challenging to set aside enough money to ensure a comfortable retirement. However, employees using 401(k), 403(b), most 457 plans, or the Thrift Savings Plan will be happy to know that the contribution limit has been increased to $22,500. This is up from $20,500, which means that employees can save more money for their retirement. The limit on yearly contributions to an IRA has also been increased to $6,500, up from $6,000. With the increased contribution limits, employees can save more money and have a better chance of achieving their retirement goals. This is good news for those looking to build their retirement savings.
Thanks to other increases the contribution limit for workers 50 and older can now contribute up to $7,500 per year. This is great news for employees who are 50 and older, as they will now be able to contribute up to $30,000 starting in 2023. The catch-up contribution limit for employees aged 50 and over participating in SIMPLE plans is also increased to $3,500, up from $3,000. This change will allow older employees to save more for retirement and catch up on their savings if they have yet to be able to contribute the maximum amount in previous years.
Taxpayers looking to lower their taxable income for 2023 may consider making deductible contributions to a traditional Individual Retirement Arrangement (IRA). However, there are income limits that determine eligibility. The phase-out ranges for 2023 are as follows:
- Single individuals covered by a workplace retirement plan: $73,000-$83,000.
- Married couples filing jointly: $116,000-$136,000.
- If you’re not covered by an employer-sponsored plan, your limit for IRA contributions is $218k-$228K.
- There’s a phase-out range for workplace retirement plans if you’re married and filing separately. This applies to both the $0 – 10k price point as well, which means that your benefits will be reduced by about 20% in any given year (or more).
If you are planning on making contributions to a Roth IRA, the good news is that there’s been an increase in eligibility. The new ranges are as follows:
- Singles and heads of household: $138,000-$153,000.
- Married couples filing jointly: $218,000-$228,000.
- Married individuals filing a separate return who contribute to a Roth IRA are not subject to an annual cost-of-living adjustment.
If you fall into any of the categories above, you may be able to deduct a larger amount of your IRA contribution on your taxes next year. That’s good news for your future retirement!
Contact a trusted financial expert today to learn more about how these changes might affect your current retirement plan.