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Michael Riley, QKA®

401(k) and IRA limits are increased for 2023

Michael Riley, QKA®

November 8th, 2022 | Written by

On October 21st, the IRS announced updated 401(k) and IRA contribution limits for 2023.

Qualified Retirement Plan Contribution Limits:

The maximum amount someone can contribute from their own compensation to a qualified retirement plan during the year, through 401(k) or 403(b) pre-tax and/or Roth after-tax contributions combined, has increased from $20,500 in 2022 to $22,500 in 2023.

In 2022, participants age 50 and over could contribute an additional $6,500 in catch-up. This has increased to $7,500 in 2023.

The total combined contribution limit (including employer contributions, employee contributions, and forfeitures) has increased from $61,000 in 2022 to $66,000 in 2023.

The maximum amount of compensation that can be taken into account for purposes of allocating contributions or forfeitures or for nondiscrimination testing has increased from $305,000 in 2022 to $330,000 in 2023.

Additionally, the maximum amount someone can contribute to a qualified 457(b) retirement plan through pre-tax and Roth after-tax contributions, plus any employer contributions has increased from $20,500 to $22,500 in 2023.

Finally, the maximum amount of an annual retirement benefit payable as a life annuity to someone through a defined benefit pension plan has increased from $245,000 in 2022 to $265,000 in 2023.

IRA Limits:

The maximum annual contribution amount an individual can make to their Individual Retirement Account (IRA) has increased from $6,000 in 2022 to $6,500 in 2023.

The IRA catch-up contribution limit for individuals aged 50 and above remains the same at $1,000.

Taxpayers can deduct contributions to a traditional IRA if they fall within the following limits for Adjusted Gross Income (AGI):

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000 for 2023, up from between $68,000 and $78,000 for 2022.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000 for 2023, up from between $109,000 and $129,000 for 2022.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000 for 2023, up from between $204,000 and $214,000 for 2022.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Roth IRA income phase-outs are as follows (based on Adjusted Gross Income):

  • The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000.
  • For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000 for 2023, up from between $204,000 and $214,000 for 2022.
  • The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

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    This information is intended for educational purposes only. It is not intended to provide any investment advice or provide the basis for any investment decisions. You should consult your financial advisor prior to making any decision based on any specific information contained herein.

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