Get ready for an update because the Internal Revenue Service (IRS) released its cost-of-living adjustment caps for pension plans and other retirement-related items for 2023.
One adjustment made was a big one. For 2023, employees can contribute $22,500 to their 401(k), 403(b) and 457 plans, as well as the federal government’s Thrift Savings Plan. That’s a jump of $2,000 from 2022.
As for the annual IRA contribution cap, it increased by $500 and is now $6,500. The IRA catch-up contribution limit for people aged 50 and over isn’t subject to an annual cost-of-living adjustment and will stay at $1,000.
As for the catch-up contribution limit for employees 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan, it went up $1,000 to $7,500 for 2023. So, starting in 2023, they can contribute up to $30,000.
The catch-up contribution limit for employees 50 and older who participate in SIMPLE plans increased $500 to $3,500 for 2023.
The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2023. Taxpayers can deduct contributions to traditional IRAs if they or their spouse were covered by a retirement plan at work – the deduction may be phased out depending on filing status and income. The phase-out ranges for 2023 are:
- $73,000 and $83,000 for single taxpayers covered by a workplace retirement plan
- $116,000 and $136,000 for married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan
- $218,000 and $228,000 for an IRA contributor who isn’t covered by a workplace retirement plan and is married to someone who is covered, and
- $0 and $10,000 for a married individual filing a separate return who’s covered by a workplace retirement plan.
The income phase-out range for taxpayers making contributions to a Roth IRA for:
- Singles and heads of household is between $138,000 and $153,000
- Married couples filing jointly is between $218,000 and $228,000, and
- 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.
The income limit for the Saver’s Credit for low- and moderate-income workers who are:
- Married filing jointly is $73,000
- Heads of household is $54,750, and
- Singles and married individuals filing separately is $36,500.
Employees can contribute up to $15,500 to their SIMPLE retirement accounts.