New 2023 IRS COLAS Announcement

401ks and IRAs have continued to be popular accounts people use to plan for retirement. Both of these accounts provide tax advantages that can help to maximize long-term savings. Each year, the IRS makes changes to contribution limits, withdrawal requirements, and other aspects of the plans. There are various changes coming in 2023 that people should be aware of when preparing for retirement. 

IRA Changes

A common question for any IRA account owner is will IRA contribution limits increase in 2023. For the upcoming year, there are various changes to be aware of. For those investing in a traditional IRA, the annual amount that can be contributed is increased to $6,500, up from $6,000 in 2022. There continues to be a catch-up provision that allows for an additional $1,000 contribution for anyone over the age of 50.

Depending on the type of IRA that you open, there could be income restrictions. For all of these accounts, the income phase-out restrictions are also increasing by a significant amount. For example, for a traditional IRA, the phase-out levels will start at $73,000 in 2023, up from $68,000 in 2022. Contributions to other types of IRA accounts have had similar changes as well. 

401k Changes

If you invest in a 401k, you are likely wondering will 401k contribution limits increase in 2023. Similar to the IRA, the 401k maximum contributions are also increasing by a material amount. In 2023, someone that has a 401k will be able to contribute up to $22,500 per year. This is a significant increase compared to 2022, when the maximum contribution was just $20,500 per year. There is also a generous increase in the catch-up contribution caps, which are increasing from $6,500 per year to $7.500 per year for anyone over the age of 50. These changes are identical to changes made towards contributions in 403b, 457 plans, and government Thrift accounts.

Anyone looking to invest and prepare for their future should take advantage of tax-advantaged retirement accounts, such as IRAs and 401ks. For those looking to plan for the future, the IRS has made some significant changes and increases to the amount that can be contributed annually. Maximum contributions have been increased for both IRA and 401k accounts at a rate that matches or exceeds the heightened inflation experienced over the past 12 months. 

Fiduciary Advisors of Phoenix, AZ is available to help answer any concerns about your investments or 401k plans.