Inside The Plan

Take it to the Limit in 2023

In today’s episode of the “Inside the Plan with the 401(k) Brothers”, host Bill Bush and Andy Bush, advisors at Horizon Financial Group take a look at changes in company retirement plan contribution limits for the coming year 2023 and will compare them with year 2022.

Episode Highlights

• 00.51: It is that time of year, that not only is fall or autumn, but it's the time of year that the IRS looks at contribution limits for the upcoming year and announces changes, if any.

• 1.48: Deferral limit for 2023 is going to be $22,500, an increase of $2000. If you are a participant in a 401K plan or 403B plan, your annual elective deferral limit for 2022 was $20,500.

• 3.44: As per Andy you don't have to wait until you hit 50 in 2023. Anytime you could become 50 and you can put the extra $7500 in all the way through and plan for it throughout the year.

• 4.52: There is a legislation being discussed right now that, authorities will likely even boost the catch-up contribution amounts even further, says Bill.

• 5.19: There is an overall plan limit of the dollars that can go in per individual per and in 2022 it was $61,000 for any individual. If you had the catch up, you could have done $67,500.

• 7.08: When you think about on the employer side of things in SIMPLE IRA, a non- elective employer deferral is 2% no matter what the employee is contributing, or doing or there's a match and it can be up to 3%.

• 8.10: They have changed the definition of highly compensated employee just a little bit based on the dollar amount and that HCE is always looking at the prior year. For HCE it was $135,000 in 2022 and that's moved up to $150,000 for 2023.

• 9.34: As per Andy, the traditional and Roth IRA's have contribution limits. In 2022, those are $6000 but next year they move up to $6500 but the catch-up provision stays the same at $1000.

• 10.20: There are ranges that are involved in traditional IRA contributions to be deductible depending on how you file your taxes and how much you make.

• 12.38: The income phases out range for taxpayers making contributions to a Roth IRA has been increased and it's going between $138,000 to $153,000 for singles, says Bill.

• 13.24: If you are married filing jointly and your modified adjusted income is above the $228,000 you cannot contribute to a Roth IRA in 2023.

• 16.08: When you cross over the 50-year mark, you really start to realize that I'm closer to retirement and I need to get my affairs in order because life is happening so quickly and the opportunities are becoming fewer and fewer, says Andy

• 16.43: All plans,allow you to change your contribution rates at the first of the year. But a lot of plans have other different points where they'll allow you to make changes.

• 17.44 Be intentional about saving rates because saving rates matter. You have the opportunity coming and opportunity is increasing for 2023.

Three Key Points

1. If you are in SIMPLE IRA plan, your elective deferral which you are allowed to make in your plan in 2022 is $14,000, but because of the step up in most everything else ,and the adjustments for inflation for 2023 the elective deferral limit has moved up to $15,500.

2. If the spouse making the IRA contribution and is covered by a workplace retirement, that phase is now increased from $116,000 to $136,000 because after $136k, it’s not deductible.

3. It doesn't matter what your income level is to make a contribution to a Traditional IRA but it does matter what your income level is if you have a workplace retirement plan to get tax deductibility for a Traditional IRA.

Tweetable Quotes

• “It's interesting that inflation happens because you would almost link deferral increases to wage inflation.” – Andy

• “There is definitely more capacity to put away dollars for retirement if you're in a company plan for 2023.” – Bill

• “You pay your social security tax on earnings up to 147,000 in 2022, but next year in 2023 you will pay social security tax on up to $160,200.” - Bill

• “There are also ways you can save for retirement outside of employer sponsored plans and that is IRA's and Roth IRA.” – Bill

• “If you're single filing single and you make more than $153k on your modified adjusted gross income, then you're not allowed to contribute to a Roth IRA.” - Bill

Resources Mentioned

• https://www.horizonfg.com/

• Podcast Editing