Most of the headlines regarding new rules for retirement planning in 2023 have addressed changes from the so-called “SECURE Act 2.0” – a provision in the year-end omnibus federal funding bill which passed both houses of Congress last week.
MOAA outlined these changes in a recent article, but they aren’t the only updates that could affect your retirement. Others have to do with cost-of-living increases, which don’t just affect pensions, survivor benefits, disability pay, and Social Security benefits: IRS code also requires the secretary of the Treasury to adjust the dollar limits each year for benefits and contributions to qualified retirement plans.
The IRS recently announced a number of changes to retirement-related items for the 2023 tax year.
Contribution limits to employer plans like 401(k)s, 403(b)s, most 457 plans, and the Thrift Savings Plan will increase to $22,500, up from $20,500 from the 2022 tax year. The catch-up contributions to these plans for employees aged 50 and over have increased to $7,500, up from $6,500; SECURE Act 2.0 changes related to catch-up contributions take effect after Dec. 31, 2024.
The annual Individual Retirement Arrangement (IRA) contribution limit went up to $6,500, a $500 increase from 2022. The catch-up contribution amount for those age 50 and older isn’t subject to a COLA adjustment until SECURE Act 2.0 changes take effect after Dec. 31, 2023; for now, it remains at $1,000.
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If you are covered by a retirement plan at work and want to contribute to a traditional IRA, the IRA deduction limits have increased: If you are married filing jointly and make less than $116,000, or are single and make less than $83,000, you can take a full tax deduction up to the amount of your contribution limit. You can take a partial deduction if you make between $116,000 and $136,000 (married) or more than $73,000 but less than $83,000 (single).
You’re not eligible to contribute to a Roth IRA if you make too much money, but the income limits have increased for 2023: If you are married filing jointly and make less than $218,000 or are single and make less than $138,000, you’re eligible to contribute up to the full limit. If you make between $218,000 and $228,000 (married) or between $138,000 and $153,000 (single), you can make a reduced contribution. If you make over these amounts, you can’t make any contribution at all.
The income limit for the Saver’s Credit, a special tax break for low- and moderate-income taxpayers who make contributions to their IRAs or employer-sponsored retirement plans, has increased. Married couples filing jointly making under $73,000 and singles making under $36,500 are eligible for a portion of the credit, which maxes out at $2,000 for married couples and $1,000 for single filers. SECURE Act 2.0 changes related to the credit take effect after Dec. 31, 2026.