The 2023 retirement plan limits have recently been announced by the IRS.
These new limits are effective January 1, 2023.
If you’re an employee and a retirement plan participant, be sure to contact your employer as soon as possible if you wish to change your retirement plan salary deferrals for 2023. Of course, if you’re a Springwater client, we’re happy to assist!
If you’re an employer and either don’t have a retirement plan in place or have questions about your existing one, please contact us for a complimentary tailor-made proposal and comparison with your current plan. You’ll have happier, more satisfied employees while also saving money.
Do you have questions about saving and investing for retirement? Contact us today to see how our team at Springwater Wealth can help you.
401(k)s, 403(b)s, etc. The standard contribution limit for employee salary deferrals to a qualified retirement plan – 401(k), 403(b), most 457 plans, and the government’s Thrift Savings Plan – is increased to $22,500 for 2023 (was $20,500 for 2022).
The “Catch-up”. The “catch-up” deferral limit for these plans is increased to $7,500 for 2023 (was $6,500 in 2022), so a person who is age 50 or older can defer a maximum of $30,000 in 2023 ($22,500 regular deferral plus a $7,500 catch-up).
Annual Defined Contribution Limit. The maximum “annual additions” limit (salary deferrals, plus profit sharing, plus forfeiture allocations, etc) to a defined contribution plan is increased to $66,000 for 2023 (was $61,000 for 2022). Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $73,500.
SEP IRAs. The contribution limit for a SEP IRA in 2023 is increased to the lesser of (a) $66,000, or (b) 25% of the employee’s salary (was $61,000 in 2022). [Note that a special computation is required to determine the contribution amount for self-employed individuals contributing for themselves]. The compensation limit used in the savings calculation is increased to $330,000 for 2023 (was $305,000 for 2022).
Solo 401(k)s. The contribution limit for a Solo 401(k) in 2023 is increased to the lesser of (a) $66,000, or (b) 100% of the employee’s salary. Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $73,500.
IRAs. The contribution limits for Traditional and Roth IRAs is increased to $6,500 in 2023 (was $6,000 in 2022). The catch-up contribution for a person age 50 or older remains at $1,000 in 2023, for a total of $7,500.
Simple IRAs. The contribution limit for a Simple IRA is increased to $15,500 for 2023 (was $14,000 in 2022). The catch-up contribution for a person age 50 or older is increased to $3,500 in 2023 (was $3,000 in 2022), for a total of $19,000.
Defined Benefit Plans. Finally, the limitation on the annual benefit of a “defined benefit” plan is increased to $265,000 in 2023 (was $245,000 in 2022).
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