Understanding 2023 Contribution Limits
In 2023, traditional IRA and Roth IRA accounts will receive their maximum annual contribution boost. It’s key to understand the changes and make sure you’re taking full advantage of your retirement savings options.
What Is a Contribution Limit?
An IRA contribution limit or maximum annual contribution is the maximum amount that an individual can make to an individual retirement account (IRA) in one calendar year. The rules that determine how much may be contributed to an IRA are different for each type of account. For the 2023 contribution year, however, both traditional IRA and Roth IRA accounts will receive a boost of $500 from their 2020 contribution limits.
Changes to Traditional IRA Contributions in 2023
For the 2023 contribution year, the traditional IRA contribution limit has been raised to $7,000. That’s a $500 increase from the 2020 limit of $6,500. This is the biggest increase in contributions to traditional IRAs since 2017. The change impacts individuals under age 50.
Changes to Roth IRA Contributions in 2023
The contribution limit to Roth IRAs has also been increased to $7,000 in 2023. This is a significant jump from the 2020 limit of $6,000, when there was no increase at all. The $1,000 increase benefits individuals under 50.
Other Important Considerations for 2023
The increase in contribution limits for traditional and Roth IRA accounts in 2023 isn’t the only thing to be aware of. Here are a few other important things to consider:
- Individuals aged 50 and older may be eligible for “catch-up” contributions, allowing them to contribute an additional $1,000 beyone the regular limit. This increases the 2023 contribution limit for those aged 50 and over to $8,000 for traditional IRAs and $7,000 for Roth IRAs.
- The IRS also has specific guidelines regarding income level and who is eligible to make contributions to IRAs. In general, if your modified adjusted gross income (MAGI) is below $125,000 if you’re single or $198,000 if you’re married filing jointly, you may be eligible to make contributions.
- Married couples filing jointly may also be eligible for a “spouse IRA”, which allows for two individual contributions — one from each spouse — for a total of $14,000 in 2023.
The Benefits of Empowering 2023 Contribution Limits
The inflation-adjusted boost to IRA contribution limits in 2023 offers a great opportunity to fuel your retirement savings with the extra resources. With the newly increased maximums, you can put away more than ever this year and get a head start on retirement planning.
The changes to traditional and Roth contributions also open the door to other retirement savings options and more comprehensive planning strategies. For example, individuals may be able to take advantage of a “spousal IRA” and catch-up contributions for those aged 50 and older.
No matter how you choose to take advantage of the 2023 contribution limits, putting extra resources into your retirement is never a bad idea. Doing so will help you to secure your financial future and ensure a comfortable lifestyle during retirement.
Summary
Staying current on the changes to 2023 contribution limits for both traditional and Roth IRA accounts is essential for retirement planning. With the $500 increase from previous years, individuals under age 50 may make a total contribution of $7,000, while those aged 50 and older may contribute up to $8,000 this year. Keep in mind the other retirement savings options available, such as a spousal IRA, and make sure to maximize your contribution limits in order to get the most out of your retirement savings.
