How to Maximize Your 401(k) and IRA Contributions in 2023

Get ready to set aside more for retirement in 2023, as the IRS recently announced an expansive upgrade of contribution limits for qualified plans due to inflation, which clocked in at 8.2% over the past year.

Employees can contribute nearly 10% more than before, reaching a total up to $22,500 annually. And those 50 or older are eligible for even higher contributions with an additional catch-up contribution increase of $1,000 — bringing the new amount up to $7,500.

With the defined contribution limit (the combined total between employee and employer contributions) increasing to $66,000 and eligible compensation rising by an impressive $25,000 to a total of 330K, employers can now enjoy greater flexibility when it comes to retirement savings. These changes create new opportunities for companies large and small alike.

Here Are Some of the Changes for 2023, as Shared by the IRS

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan will increase to $22,500.
• The limit on annual contributions to an IRA will increase to $6,500. The IRA catch up contribution limit for individuals age 50 and over is not subject to an annual cost of living adjustment and remains $1,000.
• The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan will increase to $7,500.
• The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500, up from $3,000.
• The phase out ranges for deducting contributions to a traditional IRA will also increase. Taxpayers should review Notice 2022-55 regarding the details for their situation.
• The income phase-out range for people making contributions to a Roth IRA will increase for taxpayers filing as single, head of household, and married filing jointly. Again, taxpayers should consult Notice 2022-55 for specifics about their situation.
• The amount individuals can contribute to their SIMPLE retirement accounts will increase to $15,500.

Click here to read this notice directly from the IRS, or click here to read the technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023.

Want to Boost Your Retirement Savings? Now’s the Time

The increased 401(k) and IRA contribution limits for 2023 offer individuals the opportunity to supercharge their retirement savings. If you can afford to contribute more to your retirement accounts, great! But don’t feel like you have to max out your contributions just because the IRS is giving you the option to do so. Instead, focus on getting your employer match (if they offer one) and gradually increasing your annual savings rate over time. By doing this, you’ll be well on your way to a comfortable retirement.

As always, our goal is to make the complex simple for you. Have questions? Let’s talk!

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