Retirement Plan Contribution Limits for 2023

There are limits to the monetary amount that employers and employees can contribute to a retirement plan each year. The amount is determined by the type of plan you’re contributing to.

Luckily, the IRS has announced 401(k) contribution limits are increasing in 2023 from $20,500 to $22,500. This equates to more savings that can be put away for retirement. But that’s not all that’s been adjusted. Let’s take a look at the various plan limits that have changed below.

1. Deferral limits for 401(k) plans

Employee deferrals are contributions that employees make to their retirement plan in lieu of salary. The limit for deferrals to a traditional or safe harbor plan is $22, 500 in 2023. This has increased from $20,500 in 2022, $19,500 in 2021 and 2020; and $19,000 in 2019.

2. IRA contribution limits

The limit for contributions to Individual Retirement Arrangements (IRA) has risen from $6,000 to $6,500.

3. Catch up contribution limits

For individuals aged 50 and over, their IRA catch-up contribution limit is not subject to the cost-of-living adjustment and will remain at $1,000. In addition, the catch-up limit for these individuals who also participate in 401(k) plans has increased from $6,500 to $7,500. Therefore, 401(k) retirement plan participants over the age of 50 have the opportunity to contribute up to $30,000 in 2023.

4. Income limit for Saver’s Credit

The income limit for individuals eligible for the Saver’s Credit is $73,000 for married couples filing jointly (previously $68,000), $54,750 for heads of household (previously $51,000), $36,500 for singles and married individuals filing separately (previously $34,000).

5. SIMPLE 401(k) plan contribution limit

The amount that one can contribute to their SIMPLE 401(k) plan has risen from $14,000 to $15,000.

6. Catch-Up Contributions to SIMPLE 401(k) plans

Those aged 50 and over who participate in SIMPLE plan retirement accounts can now contribute up to $3,500, up from 3,000.

7. Roth IRA Compensation Limits

The income range for taxpayers making contributions to a Roth IRA has increased from between $129,000 and $144,000 to between $138,000 and $153,000 for singles and heads of household. For those married and filing jointly, the income phase-out range is between $218,000 and $228,000 (previously between $204,000 and $214,000). Finally, for those married, filing separately, and contributing to a Roth IRA their contribution is not subject to a cost-of-living adjustment and remains between $0 and $10,000.

With these exciting new increases coming in 2023, it may be wise to consider your investment options and how much more you feel you can contribute. Do you have questions about 401(k) and other retirement plans? Contact our seasoned team of professionals today for more information.

This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up to date.