Not much good can come from a period of high inflation.
However, if you had to search for a silver lining, it is that the Internal Revenue Service in late 2022 announced historic increases in the contribution limits for retirement plans.1
Scan the accompanying tables to see some of the new limits that may apply to your situation. Keep in mind, however, that just because the limit amounts have changed does not mean that adjusting your contribution amounts is appropriate. We can help you better understand the role each of your retirement accounts plays in your overall financial strategy.
* As part of the SECURE Act 2.0, starting January 1, 2025, investors aged 60 through 63 will be able to make annual catch-up contributions up to $10,000
|Maximum amount for 401(k), 403(b), and most 457 plans (age 49 and younger)||$22,500||$20,500||+$2,000|
|Employee catch-up contribution limit (age 50 and older) *||$7,500||$6,500||+$1,000|
|Maximum employee elective deferral (age 50 years and older)||$30,000||$27,000||+$3,000|
|SIMPLE account maximum||$15,500||$14,000||+$1,500|
|SIMPLE account catch-up limit||$3,500||$3,000||+$500|
Traditional Individual Retirement Accounts3
|Filing Status||2023 Phase Out Range||2022 Phase Out Range|
|Single taxpayer covered by workplace plan||$73,000–$83,000||$68,000–$78,000|
|A person who is not covered by workplace plan is married to someone who is covered||$218,000–$228,000||$204,000–$214,00|
|A married individual filing a separate return who is not covered by a workplace plan||$0–$10,000||$0–$10,000|
* If the spouse making the IRA contribution is covered by a workplace plan.
2023 Phase Out Range
2022 Phase Out Range
|Single and head of household||$138,000–$153,000||$129,000–$144,000|
|Married filing jointly||$218,000–$228,000||$204,000–$214,000|
|Married filing separately||$0–$10,000||$0–$10,000|
After reaching the age 73, you must begin taking the required minimum distributions from your 401(k), 403(b), or other defined contribution plans in most circumstances. Withdrawals from defined contribution plans are taxed as ordinary income. If a withdrawal is made before age 59½, a 10% federal income tax penalty may apply.
After reaching age 73, you must begin taking the required minimum distributions from a traditional individual retirement account (IRA) in most circumstances. Withdrawals are taxed as ordinary income. If a withdrawal is made before age 59½, a 10% federal income tax penalty may apply.
Roth IRA distributions must meet a five-year holding period and occur after age 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. In certain other circumstances, such as the owner’s death, tax-free and penalty-free withdrawals can also be made. Note that the original Roth IRA owner is not required to make minimum annual withdrawals.
- IRS.gov, November 21, 2022
- SHRM.org, October 21, 2023
- Tax.ThomsonReuters.com, October 25, 2022