Changes in Contribution and Income Limits for Retirement Accounts from 2022-2023

Retirement is an important phase in everyone's life, and it is crucial to plan for it well in advance. One of the ways to do so is to invest in various retirement accounts, such as IRAs, 401ks, SEPs, SIMPLE, 457s, pensions, and other employer-sponsored retirement plans. It is essential to stay up to date on the changes in contribution limits and income phase-out thresholds for these accounts to ensure that you're making the most of your retirement savings. In this article, we'll discuss the changes in contribution limits and income phase out thresholds for retirement accounts from 2022 to 2023.

Contribution Limits for Retirement Accounts in 2022-2023

The contribution limits for different retirement accounts vary and are subject to change every year. Here's a look at the contribution limits for some popular retirement accounts for 2022-2023:

IRAs (Individual Retirement Accounts)

• For 2022, the contribution limit for traditional and Roth IRAs is $6,000.  If you're aged 50 or older, you can make an additional catch-up contribution of $1,000.
• For 2023, the contribution limit for traditional and Roth IRAs is expected to be $6,500, and there is no change in the catch-up contribution.

401ks, 403b’s and 457’s

• For 2022, the contribution limit for 401k and other employer-sponsored retirement plans is $20,500.  If you're aged 50 or older, you can make an additional catch-up contribution of $6,500 in 2022.
• For 2023, the contribution limit for 401k and other employer-sponsored retirement plans is expected to be $22,500. The catch-up contribution limit has increased to $7,500 in 2023
  

SEPs (Simplified Employee Pension Plans)

• For 2022, the contribution limit for SEPs is the lesser of 25% of your compensation or $61,000.
• For 2023, the contribution limit for SEPs is expected to be the lesser of 25% of your compensation or $66,000.
  

SIMPLE (Savings Incentive Match Plan for Employees)

• For 2022, the contribution limit for SIMPLE is $14,000.  The catch-up contribution limit for those 50 or older is $3,500, this will not change in 2023.
• For 2023, the contribution limit for SIMPLE is $15,500.
  

Income Phase Out Thresholds for Retirement Accounts in 2022-2023

The income phase-out thresholds determine the amount of money you can contribute to certain retirement accounts, based on your income. Here's a look at the income phase-out thresholds for some popular retirement accounts for 2022-2023:

IRAs (Individual Retirement Accounts)

While there is no phase out limit on contributions to a traditional IRA, there is a limit on deducting your contributions and receiving a tax benefit, if you are covered by a workplace retirement plan.  If neither you nor your spouse are covered by a workplace retirement plan, there are no income phaseouts for a Traditional IRA.

• For 2022, if you're a single taxpayer and your modified adjusted gross income (MAGI) is between $68,000 and $78,000, you can only deduct a portion of the IRA contribution limit. If your MAGI is $78,000 or higher, you cannot deduct any of your contributions to a traditional IRA.  These limits are increased to $73,000 and $83,000 in 2023.
• For 2022, if you're a married taxpayer filing jointly and your MAGI is between $109,000 and $129,000, you can only deduct a portion of the IRA contribution limit. If your MAGI is $129,000 or higher, you cannot deduct any of your contributions to a traditional IRA. These limits are increased to $204,000 - $214,000 if you don’t have access to a workplace retirement plan, but your spouse does.  These limits are increased to $218,000 and $228,000 in 2023.
  

For ROTH IRA’s there is no difference if you have access to an employer sponsored retirement plan or not.

• For 2022, if you're a single taxpayer and your MAGI is between $129,000 and $144,000, your ability to make contributions to a Roth IRA is gradually reduced. If your MAGI is $144,000 or higher, you cannot make contributions to a Roth IRA.  These limits are increased to $138,000 to $153,000 in 2023.
• For 2022, if you're a married taxpayer filing jointly and your MAGI is between $204,000 and $214,000, your ability to make contributions to a Roth IRA is gradually reduced. If your MAGI is $214,000 or higher, you cannot make contributions to a Roth IRA.  These limits increased to $218,000 to $228,000.
  

401ks and Other Employer-Sponsored Retirement Plans

While there are rules around how much highly compensated employees or owners can contribute to 401ks and other employer-sponsored retirement plans, if the plans are safe harbor, there are no income phase outs.  Talk to your plan sponsor to determine what if any limits there are on your specific plan.

Retirement accounts, such as IRAs, 401ks, SEPs, SIMPLE, 457s, pensions, and other employer-sponsored retirement plans, play a crucial role in ensuring a comfortable retirement. It's essential to stay informed about the changes in contribution limits and income phase-out thresholds to make the most of your retirement savings. The contribution limits and income phase-out thresholds for retirement accounts are subject to change every year, and it's essential to consult a professional financial advisor to determine your contribution limit. Start planning for your retirement today and make the most of your savings. 

FAQs

1. How do I determine my contribution limit for a retirement account?

Your contribution limit is determined based on your age, income, and the type of retirement account you have. You can consult a financial advisor or use online calculators to determine your contribution limit.

2. Can I make contributions to multiple retirement accounts in a year?

Yes, you can make contributions to multiple retirement accounts in a year, as long as you don't exceed the contribution limit for each account.  Be careful as some accounts share a limit, for example ROTH and Traditional IRA’s use the same maximum contributions as do 401(k)s and 403b’s. (But there is a separate annual maximum for 457 accounts)

3. Are contribution limits for retirement accounts the same for everyone?

No, contribution limits for retirement accounts vary based on your age and income.

4. Can I make contributions to a retirement account if my income is above the phase-out threshold?

No, if your income is above the phase-out threshold, you cannot make contributions to certain retirement accounts.

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