IRA Contribution Limits 2022 – 2023: What Changed?
New contribution limits for 2023 are out— and there are some differences from the 2022 limits.
Want the lowdown on these updates? Here’s how much you can save for retirement in summary:
Traditional IRA & Roth IRA Contributions
The contribution limit for 2023 remained at $6,000 per year for both Traditional and Roth IRAs. Catch up contributions will remain $1,000, so if you are over 50 you can contribute up to $7,000 a year. Traditional IRAs allow for tax-deductions upfront with deferred taxes— meaning you don’t pay taxes until the money comes out of the account. But the IRS wants those taxes eventually, so you’ll pay these when you take distributions at retirement.
Roth IRAs are post-tax, meaning you’ve already paid taxes on the money before you contributed to your IRA. Since you’ve already paid taxes on these funds, you may not owe taxes when distributing funds, and aren’t required to take RMDs. Your investment gains are in a post-tax environment.
SEP IRA Contribution Limits
SEP contributions are limited to 25% of compensation or the maximum cap for the year (the lesser of the two amounts). The contribution limit for SEP IRAs for 2023 is capped at $66,000. This is an additional $5,000 compared to 2022 ($61,000).
SEP IRAs are plans for small business owners (with one or more employees), or anyone that is self-employed. They have different deadlines and higher contribution limits compared to Traditional and Roth IRAs. This makes them especially attractive for self-directed investors (especially real estate agents), since you can start investing tax-deferred at a faster rate. Contributions are made by the employer, and employees can’t directly contribute to the plan. The employer must contribute the same amount for all employees, including yourself— but the benefits can be huge due to the higher contribution limits.
SIMPLE IRA Contribution Limits
SIMPLE IRA contributions for 2023 increased to $15,500 from $14,000 in 2022. The catch up contribution for 2023 increased to $3,500 from $3,000 in 2022.
SIMPLE IRAs are for employers with 100 or fewer employees, but unlike the SEP IRA, they allow for employee contributions to the plan. It’s a low-hassle, low-cost plan to establish and maintain, and with a self-directed SIMPLE IRA, employees can invest their retirement their way.
Self-Directed IRA Contribution Limits
SEP IRA Contribution Limits |
ELIGIBILITYSelf-employed individuals or small business owners, including those with employees: Sole proprietors, Partnerships, C corporations, S corporations |
CONTRIBUTION LIMITS25% of compensation or maximum cap for the year (the lesser amount) 2022 max: $61,000 2023 max: $66,000 |
HIGHLIGHTSTax-deferred— so you don’t pay taxes until withdrawn at retirement Tax-deductible contributions Easy to set up and maintain Funded by employer contributions only |
CONTRIBUTION DEADLINEApril 15, 2023 or |
SIMPLE IRA Contribution Limits
|
ELIGIBILITYBusinesses with 100 or fewer employees: Sole proprietors, Partnerships, C corporations, S corporations Participating employees must have earned at least $5,000 in compensation during any 2 years preceding |
CONTRIBUTION LIMITSEmployer: mandatory 3% matching contribution or 2% non-elective contribution Participants contributions 2022: Up to $14,000 in salary deferrals ($17,000 if age 50 or older) 2023: Up to $15,500 in salary deferrals ($19,000 if age 50 or older |
HIGHLIGHTSTax deferred— so you don’t pay taxes until withdrawn at retirement Employer contributions Funded by employee deferrals and employer contributions |
CONTRIBUTION DEADLINEEmployees: No later than 30 days after the month in which deferred |
ROTH IRA Contribution Limits
|
ELIGIBILITYNo age limit Must have earned income |
CONTRIBUTION LIMITS2022: $6,000 ($7,000 if age 50 or older) 2023: $6,500 ($7,500 if age 50 or older) |
HIGHLIGHTSEarnings can grow tax-free Taxes are paid up front, so you’re able to withdraw your contributions tax-free and penalty-free at any time |
CONTRIBUTION DEADLINEApril 15, 2023 to make contributions for the prior calendar year |
Traditional IRA Contribution Limits
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ELIGIBILITYNo age limit Must have earned income |
CONTRIBUTION LIMITS2022: $6,000 ($7,000 if age 50 or older)
|
HIGHLIGHTSTax-deductible contributions based on Modified Adjusted Gross Income (MAGI) |
CONTRIBUTION DEADLINEApril 15, 2023 to make contributions for the prior calendar year |
Other Changes to Retirement Plans
There were a few other changes for retirement plans. These changes may impact your investment strategy, so you may want to discuss with a financial advisor if you have detailed questions.
Retirement Age
Previously you were required to take a Distribution at the age of 70 ½ . The new age for Required Minimum Distributions (RMD) is 72. It is still 70 ½ if you reach 70 ½ before January 1, 2020.
IRA Contribution Deadline 2022
The IRA contribution deadline for the tax year 2022 is April 15, 2023.
Modified Adjusted Gross Income (MAGI)
Modified adjusted gross income (MAGI) is an important number. First of all, it determines whether you can contribute to a Roth IRA and if you can deduct contributions to a Traditional IRA. We recommend that you consult with a tax advisor to determine if you qualify for a partial deduction or full deduction. These income ranges all increased for 2022.
MAGI Changes for 2023
Traditional IRAs
- For single taxpayers covered by a workplace retirement plan, the phase-out range is $73,000 to $83,000, up from $68,000 to $78,000.
- For married couples filing jointly tax returns, where the spouse making the IRA contribution is covered by a retirement plan at work, the phase-out range is $116,000 to $136,000, up from $109,000 to $129,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $2188,000 and $228,000, up from $204,000 and $214,000.
- For married filing separately, who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRAs
- The income phase-out range for taxpayers making contributions to a Roth IRA is $138,000 to $153,000 for singles and heads of household, is up from $129,000 to $144,000.
- For married couples filing jointly, the income phase-out range is $218,000 to $228,000, up from $204,000 to $214,000.
- The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
In a Nutshell
Bigger contributions mean there’s more opportunity to invest and to grow your retirement wealth— Especially for self-directed IRA investors. The industry has been clamoring for a change, something to encourage greater retirement savings for a world that requires so much more than it used to in your golden years— and maybe this is a step in the right direction. If you have questions about the tax implications of these changes by the IRS, please consult a tax advisor.
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