Retirement Plan Contribution and Income Limits for 2023

Published on November 3, 2022

The IRS has increased the contribution limits for all types of retirement plans—Traditional and Roth IRAs, certain governmental plans, and qualified retirement plans (defined benefit and defined contribution plans) for 2023. The new amounts adjust for cost-of-living increases and also apply to income limits as we detail below.

Cost-of-Living Adjusted Limits for 2023

• SEP IRAs – Contribution limits for self-employed taxpayers will increase by $5,000 to $66,000 or 25% of annual compensation in 2023.
  • For small-business owners who offer (and fund) a SEP plan for their employees, the minimum compensation level for employees will rise to $750 (from $650 in 2022) and the annual compensation limit will be $330,000 (up $25,000).
• SIMPLE IRAs –The deferral limitation will go up from $14,000 to $15,500, with catchup contributions rising from $3,000 to $3,500 for workers ages 50+.
• Traditional and Roth IRAs – Contribution limits (aggregate across all Traditional and Roth IRAs the account owner has) will be $6,500 a year; the $1,000 catchup contribution does not change.
• 401(k) plans (including self-directed solo (k)s) – Contribution limits will increase by $2,000 to a total of $22,500.

Roth IRA contribution and AGI limits

Taxpayers with a Roth IRA may contribute up to the full allowed amount annually depending on their income. The adjusted gross income (AGI) ranges have increased for 2023 for making the maximum deductible contributions.

• For married couples filing jointly, the phase-out range is between $218,000 and $228,000, an increase of $14,000.
• For a married individual filing a separate return, the applicable dollar amount is not subject to an annual cost-of-living adjustment and remains $0.
• For singles and heads of households, the income phase-out range is between $138,000 and $153,000 (up $7000 from the 2022 range).
• For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Traditional IRAs

If the taxpayer or the spouse was covered by a workplace retirement plan during the year, the deduction on the Traditional IRA contributions may be reduced or phased out until it is eliminated. This depends on filing status and income.

• The deduction for taxpayers making contributions to a traditional IRA is phased out for single individuals and heads of household who are active participants in a qualified plan with adjusted gross incomes between $73,000 and $83,000. This represents a $5,000 increase from last year.
• For married couples filing jointly, if the spouse who makes the IRA contribution is an active participant, the income phase-out range is between $116,000 and $136,000, up $7,000 from 2022.
• For an IRA contributor who is not an active participant and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $218,000 and $228,000 (an increase of $14,000 in 2022).
• The phase-out range for a married individual filing a separate return and who is an active participant is not subject to an annual cost-of-living adjustment; this remains $0 to $10,000.

All the details about these increased contribution limits and cost-of-living adjustments for 2023 are on IRS.gov (see Notice 2022-55), which also has information for participants in employer-sponsored retirement plans. As always, we recommend you consult your trusted tax advisor for guidance.

Maximize your contributions to a self-directed IRA

All types of IRAs may be self-directed (Traditional, Roth, SEP, SIMPLE, etc.). While they are governed by IRS contribution limits, the types of alternative assets these plans allow are far broader than in their typical counterparts. Therefore, you can maximize those annual retirement plan contributions by investing in a broad array of alternative assets you already know and understand.

With a self-directed IRA, you can build a more diverse retirement portfolio and a hedge against market volatility and inflation—so crucial in today’s market. You’ll also have the potential to save more for retirement through nontraditional investments such as real estate, precious metals, private equity, royalties, and many more. The only limitations on your self-directed investments are no collectibles or insurance policies, no self-dealing or extensions of credit, and no transactions with disqualified persons.

Self-directed IRAs at Next Generation

As we head into 2023, consider how you can maximize your annual retirement plan contributions with a self-directed IRA at Next Generation—and the diversity of alternative assets you can include. You may register for a complimentary educational session with a Next Generation representative to get more insights into the many benefits and options of self-direction as a retirement strategy. You can also contact us directly by email at NewAccounts@NextGenerationTrust.com, call us at 888.857.8058, or text us at 848.233.4076.