Inflation has proven to be a persistent burden driving just about everything up. It has averaged a dreadful 8.2% for the year. One of the unintended benefits of high inflation is the IRS raised contribution limits for retirement plans. It is the biggest increase for retirement plans since 1997.
Traditional IRA and Roth IRA contributions limits for 2023 will increase for eligible participants, $6,000 to $6,500. Catch up contributions for individuals 50 and over will remain the same, $1,000. Eligible participants can contribute $7,500 to their Roth IRA or Traditional IRA. This is an increase from $7,000.
Roth IRA’s have income phase-outs and they are also increasing. If your income is in the phase-out range you can contribute but at a reduced amount while those with incomes exceeding that range aren’t eligible to contribute. The income phase-out for single filers is $138,000 to $153,000. For married couples filing jointly the phase out is $218,0000 to $228,000.
The phase-out range for a tax-deductible contribution to a Traditional IRA increased as well, $73,000 and $83,000 for single taxpayers covered by a workplace retirement account. For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $116,000 and $136,000.
401(k), 403(b), Thrift Savings Plan and most 457 plan contributions limits are also increasing. Under 2023 IRS guidelines you can contribute up to $22,500. The catch-up contribution, for employees 50 and over was raised to $7,500 from $6,500. SEP IRAs and Solo 401(k) will be $66,000 for 2023. You will need to be self-employed to be eligible for a SEP or Solo 401(k).
Health Saving Accounts (HSA) increased to $3,850 from $3,650 for individuals. For families it increased from $7,300 to $7,750.
If inflation hasn’t taken too big of a bite out of your wallet then I encourage you to inflate your retirement savings. (Sorry bad joke) It’s not too late to minimize your taxes for 2022 and you’d be buying at a discount giving the declines in the market this year.