Are you ready for retirement? You can get ready now, and the IRS is going to “help” you a bit by increasing some retirement account contribution limits for the 2023 tax year. As a result, you will be able to put more away tax-free or tax-deferred into a retirement account.
Traditional or Roth
If you are saving for retirement with a Traditional or Roth IRA, the 2023 IRS limit on annual contributions to your account goes up $500 – from $6,000 this year to $6,500 next year. That’s an increase of 8.33%.
The limit was stuck at $6,000 since 2019, but because of the steep inflation we’ve experienced lately finally gave it a boost. The additional IRA “catch-up” contribution for people 50 and over is not subject to an annual cost-of-living adjustment and stays at $1,000 for 2023 (for a total 2023 contribution limit of $7,500 if you’re at least 50 years old).
In 2023, employees can contribute up to $22,500 a year for elective deferrals, up from $20,500, to 401(k), 403(b) and other tax-advantaged employer savings plans. Also included are 457 plans, which are available to public employees and to workers at other tax-exempt institutions. The catch-up contribution for those 50 or older is $7,500 annually. You can read more in the IRS news release from October 21, 2022.
The total solo 401(k) contribution limit is up to $61,000 in 2022 and $66,000 in 2023. There is a catch-up contribution of an extra $6,500 for those 50 or older in 2022 and $7,500 in 2023.
The Savings Incentive Match Plan for Employees (SIMPLE IRA) also sees a boost to 2023 contribution limits. The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000. If you are 50+, the catch-up contribution amount is now $3,500.
The contribution limit for the Simplified Employee Pension (SEP) IRA is $66,000 for 2023. The maximum compensation considered for the SEP is now set at $330,000 which is up from $305,000 in the 2022 tax year.
A Health Savings Account (HSA) is a type of savings account you can set up to pay certain health care costs. An HSA lets you to put money away and withdraw it tax free, as long as you use it for qualified medical expenses, like deductibles, co-payments, coinsurance, and more. The HSA contribution limits for 2023 is $3,850 for self-only coverage and $7,750 for family coverage. The H.S.A. savings can be self-directed into alternative assets.
Please check with your tax professional to determine the correct contribution amount for you. To contribute to your uDirect IRA account, complete a Contribution Form found HERE. For answers to all your self-direct retirement questions, reach out to uDirect IRA Services at info@uDirectIRA.com