IRS: An increase in the retirement contribution limits from 2023

In response to inflation, the Internal Revenue Service (IRS) proposed contribution limit modifications for employee retirement plans in October 2022.

The Internal Revenue Service published Notice 2022-55, which discusses cost-of-living adjustments for retirement and pension programs. The modifications will take effect on January 1, 2023.

Increases in Retirement Plan Contribution Limits in the New Year

Workers’ maximum allowed contributions to 401(k), 403(b), 457 plans, or the Thrift Savings Plan for federal employees will increase to $22,500 in 2023, up from $20,500.

The catch-up contribution ceiling for employees aged 50 and up will rise from $6,500 to $7,500. So, if you work and are aged 50 or more, you can contribute a maximum of $30,000 ($22,500 + $7,500 = $30,000) to these sorts of retirement plans in 2023, in addition to the contributions made by your employer.

Employees with individual retirement accounts (IRAs) may contribute up to $6,500 in 2023. The yearly cost-of-living adjustment won’t apply to the $1,000 IRA catch-up contribution maximum for workers 50 and older.

In 2023, the catch-up contribution maximum for SIMPLE plans rises to $3,500 from $3,000 for employees 50 and older.

Ranges of Phase-Out

Your annual income also affects the amount you contribute to some types of investment accounts. The IRS, which defines these “phase-out” limits, announced numerous adjustments to the regular and Roth IRA phase-out ranges.

If a taxpayer or their spouse has an employer retirement plan in 2023, an IRA contribution can be lowered until it equals zero. Again, applicability is determined by income.

Ranges for Traditional IRA Phase-Out in 2023

• Married taxpayers who file jointly: $116,000 to $136,000 (an increase from $109,000 to $129,000).
• Single taxpayers with a company retirement plan: $73,000 to $83,000, an increase from $68,000 to $78,000.
• Individuals with a non-workplace IRA married to someone with a workplace retirement plan: $218,000 to $228,000, an increase from $204,000 to $214,000 in 2022.
• Individuals with a non-workplace IRA married to someone with a workplace retirement plan: $218,000 to $228,000, an increase from the 2022 range of $204,000 to $214,000.
• A married person filing separately who is enrolled in a corporate retirement plan: The yearly cost-of-living adjustment does not apply to phase-out ranges. The phase-out range is still set at $0 to $10,000.

2023 Roth IRA Phase-Out Ranges 

• Married taxpayers who file jointly: $218,000 to $228,000, an increase from $204,000 to $214,000 in 2022.
• Single taxpayers: $138,000 to $153,000, an increase from $129,000 to $140,000 in 2022.
• A married couple filing separately: A married individual filing separately doesn’t get the yearly cost-of-living adjustment for phase-out ranges. The phase-out range stays $0 to $10,000.

The IRS recently announced modifications to the Saver’s Credit qualifying income limit. The following are the new income limitations that will be in effect beginning in 2023:

• Married couples filing jointly can earn up to $73,000, up from $68,000.
• Household heads can earn up to $54,750, an increase from $51,000.
• Singles and married individuals filing separately can earn up to $36,500, an increase from $34,000.

Additional Government Efforts to Boost Retirement Savings

The SECURE Act 2.0 was enacted by the House of Representatives in March 2022. If this bill passes in Congress, workers aged 50 and over will get more opportunities to enhance their retirement funds.

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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.