IRS Set to Increase Retirement Plan Contribution Limits in 2023
With the news buzzing about raging inflation and the increased cost of living, there is a silver lining buried in these bleak reports. In 2023, the IRS is increasing the contribution limits to Americans’ 401(k)s and IRAs at unprecedented rates. Account values are down, so this presents an excellent opportunity to ramp up savings.
How much are limits increasing?
401(k), 403(b), and government TSP contribution limits are increasing by $2,000 from $20,500 in 2022 to $22,500 in 2023. That’s the largest increase on record, almost 10%. Individuals ages 50 and over, will be able to contribute an additional $7,500 in 2023 for a grand total of $30,000 annually. IRA and Roth IRA account owners may contribute up to $6,500 in 2023, a $500 increase over 2022 limits. Catch-up contributions for those 50 and older will remain at $1,000 for a new total of $7,500.
Income Phaseout Ranges Increase
The income phaseout ranges for Roth IRA contributions will also increase in 2023. Individuals may earn between $138,000 and $153,000 and those married filing jointly may earn between $218,000 and $228,000 and make a Roth IRA contribution.
Ramp Up Your Contribution
Use this occasion to ramp up the contribution percentage in retirement plans in order to make lemonade out of the market’s current dip and uncertainty. Buying in while the market is down allows each contribution to buy more shares and therefore allows for more growth opportunity with more shares owned.
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