As part of your planning for next year, now is the time to review the funding of your retirement accounts in 2023. Recent cost of living calculations mean much higher contribution limits for next year. Additionally, the higher income phase-outs for eligibility will make many more taxpayers eligible for fully deductible contributions. So plan now to take full advantage of this tax benefit. Here are the annual contribution limits for the most popular programs:
How to use
Identify the type(s) of retirement savings plan(s) you currently use.
Take note of the plan’s annual savings limits to adjust your savings to take full advantage of annual contributions. Remember, a missed year is a missed opportunity that doesn’t come back.
If you’re 50 or older, add the catch-up amount to your total potential savings.
Take note of the income limits in each type of plan.
For traditional IRAs, if your income is below the stated threshold, your taxable income is reduced by your contributions. The deductibility of your contributions is also limited if your spouse has access to a plan.
In the case of Roth IRAs, income limits limit who can participate in the plan.
Other ideas
If you haven’t already done so, also consider:
Create new accounts for a spouse or dependents
Use this time as a chance to review the status of your retirement plan, including beneficiaries
Consider contributions to other tax-advantaged plans like flexible spending accounts (healthcare and dependent care) and prepaid medical savings plans like health savings accounts.
James Angell is a Certified Public Accountant based in Willits. His office is located at 461 S. Main St. and he can be reached at 707-459-4205.