As the new year begins, it’s important to review the contribution limits for different savings accounts. By using accounts with tax benefits, you can make the most of your money. Here are the contribution limits for 2023.
401(k) Plans
First, let’s start with the 401(k) plans. The contribution limit for 401(k)s for 2023 is $22,500 for individuals under 50 years of age and $30,000 for individuals 50 years and older. These limits are an increase from the 2022 limits of $20,500 and $27,000, respectively. It’s important to note that these limits apply to both traditional and Roth 401(k)s.
Individual Retirement Account (IRA)
Next, let’s move on to the Individual Retirement Accounts (IRAs). The contribution limit for traditional and Roth IRAs for 2023 is $6,500 for individuals under 50 years of age and $7,500 for individuals 50 years and older. This is a slight increase from the 2022 limits of $6,000 and $7,000 respectively.
To be eligible to contribute to a Roth IRA in 2023, your modified adjusted gross income (MAGI) must be under $153,000 or $228,000 if married and filing jointly.
Health Savings Account (HSA)
For those looking to save for future qualified medical expenses, the contribution limit for HSAs for 2023 is $3,850 for individuals with self-only coverage and $7,750 for individuals with family coverage. This is an increase from the 2022 limits of $3,650 and $7,300, respectively.
Bottom Line
The contribution limits for 2023 are giving individuals the opportunity to save more for their retirement and medical expenses. Now is a great time to review your current savings plan and make any necessary adjustments. Please reach out to us with any questions.
George Maroudas
847-550-6100
george@pmgwealth.com
Twitter @ChicagoAdvisor
Disclaimers and Sources:
Contribution and income limits from the IRS.
The first five-year rule states that you must wait five years after your first contribution to a Roth IRA to withdraw your earnings tax free.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
