Have your Retirement Account contributions fallen behind? If so, there is good news from the IRS. No, really.
The United States Internal Revenue Service announced significant increases in contribution limits to 401(k) and other tax-deferred retirement plans for 2023 and beyond. The changes were detailed in a recent CNN Business article “Unprecedented 401(k) boost: IRS increases amount you can save for retirement in 2023“.
If you find that you have fallen behind in your retirement savings, you are not alone. Investment advisor Vanguard reported recently that only 14% of 401(k) participants contributed the maximum amount annually, and only 16% of eligible employees 50+ made additional catch-up contributions.
Contributions to Workplace Plans Increase
Allowable contributions to 401(k), 403(b), most 457 plans, and federal employee Thrift Savings Plans will rise 9.8% to $22,500 per year. This jump is mostly due to the rise in inflation over the past 12 months. Employees over the age of 50 can contribute even more to their nest egg. The Catch-Up Contribution limits will rise a whopping 15.4% to $7,500. This brings the total amount an employee over the age of 50 can contribute to their tax-deferred retirement plan to $30,000 per year. Employer matching contributions would bring that amount even higher.
IRA Contribution Limits Also Increase
The IRS also announced an increase to the contribution limits for Traditional and Roth IRAs. Individual Retirement Account contribution limits will rise 8.3% in 2023 to $6,500 per year. The Catch-Up Contribution limit will remain at $1,000.
More people will reap tax benefits from Traditional and Roth IRAs next year as well. The Modified Adjusted Gross Income limits will rise for individual and joint filers. For Traditional IRAs, the modified AGI limit will be $83,000 for individuals and $136,000 for married filing jointly. The modified AGI limit for Roth IRAs will be $153,000, and $228,000 for married filing jointly. Talk with a Certified Financial Professional with a fiduciary responsibility to you to ensure you are making the best decisions for your situation.
More Change to Come?
The IRS made another announcement about Income Tax Brackets beginning in 2023. The inflation adjusted tax brackets and other tax provisions for 2023 are still to come. Additionally, workers may see legislative changes to tax-advantaged retirement plans in the next few months.
With rising inflation impacting everything from housing costs, to food and healthcare, future retirees will need all the savings they can put aside if they want to enjoy their retirement. If you have questions about creating trusts or other estate planning tools as a part of your retirement planning, contact our office today.