401(k) and IRA Limits Rise for 2023
The IRS has announced that the amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022. This also applies to 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.
Also increasing is the catch-up contribution limit for employees aged 50 and over who participate in the above plans. This limit has increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023.
The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000.The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.
IRAs are also going up. The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch‑up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
Phase-out ranges adjusted
The IRS has also reminded taxpayers that they can deduct contributions to a traditional IRA only if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced until it is eliminated, depending on filing status and income. However, if neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply. The IRS has listed the new ranges on its site. The IRS has also announced Roth IRA income phase-out changes, which are also listed on the IRS site.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.