The maximum amount of money you can contribute to your retirement accounts each year are known as retirement contribution limits. The amounts that can be contributed each year can change as they’re indexed to inflation. This year, in 2023, the changes are more significant because inflation was higher in 2022.
What do the increases mean for you? As with most things regarding retirement, it varies depending on your age. We’ve compiled a list of some of the limit increases for you below – changes are bolded – and share some highlights on changes also happening this year as part of the “Secure Act 2.0.”
Kevin McCurdy, SVP and CIO, Wealth Advisor, provides some of the 2023 changes compared to 2022.
2023 401(k) Contribution Changes
- 2023 - $22,500; individuals age 50 and up can contribute an additional $7,500 ($30,000 total)
- 2022 - $20,500; individuals age 50 and up can contribute an additional $6,500 ($27,000 total)
2023 Traditional IRA/Roth IRA Contribution Changes
- 2023 - $6,500; individuals age 50 and up can contribute an additional $1,000 ($7,500 total)
- 2022 - $6,000; individuals age 50 and up can contribute an additional $1,000 ($7,000 total)
2023 Simple IRA Contribution Changes
- 2023 - $15,500; individuals age 50 and up can contribute an additional $3,500 ($19,000 total)
- 2022 - $14,000; individuals age 50 and up can contribute an additional $3,000 ($17,000 total)
2023 Indiana 529 Contribution and State Tax Credit Changes
- 2023 - Contributions by Indiana taxpayers qualify for a 20% tax credit with a new maximum credit of $1,500 for a $7,500 contribution
- 2022 - Contributions by Indiana taxpayers qualify for a 20% tax credit with a maximum credit of $1,000 for a $5,000 contribution
Highlights of the SECURE ACT 2.0 Changes
The SECURE 2.0 Act of 2022 is a law designed to substantially improve retirement savings options. The Act contains over 90 new provisions to promote savings, boost incentives for businesses, and offer more flexibility to those saving for retirement.
Here are 5 highlights we find significant and take effect in 2023:
- Required minimum distribution (RMD) changes to age 73.
- The penalty for not distributing required minimum distribution (RMD) falls to 25% (from 50%) and is reduced to 10% if the RMD is taken by the second year it was due.
- Requires the Department of Labor to create a “Lost 401k” database within two years.
- 401(k), 403(b), and 457(b) plans can make matching or non-elective contributions as Roth contributions provided the participant is fully vested.
- Terminally ill people may withdraw money from their IRA accounts without penalty before age 59.5
Let us Know if You have Questions about 2023 Contribution Limit Increases
We hope you can use the retirement limit increases this year to your advantage. If you have questions about any of the above information, please email us at contactcooke@cookefg.com.
Registered Representatives of Sanctuary Securities, Inc. and Investment Advisor Representatives of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Cooke Financial Group is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.