2023 Contribution Limits — 401(k), IRA, Solo 401(k), SEP-IRA, HSA

As 2023 continues to fly by, it’s important to take note of the updated retirement account contribution limits for 2023. These limits are set by the Internal Revenue Service (IRS) and can have significant implications for your retirement savings strategy. 

In this blog post, we'll review the new contribution limits for 2023 and provide some tips on how to maximize your retirement savings.

401(k) and 403(b) Plan Contribution Limits

For 2023, the contribution limit for 401(k) and 403(b) plans increases to $22,500, up from $20,500 in 2022. The catch-up contribution limit for those age 50 and older rose to $7,500, up from $6,500 in 2022. That brings the total contribution limit to $30,000 for individuals age 50 and older.

It's important to note that employer contributions do not count towards these limits, so you may be able to contribute more than the maximum limit if your employer offers a matching contribution or profit-sharing contribution.

401(k) and 403(b) Contribution Cheat Sheet, 2023

Individual contribution limit: $22,500

Catch-up contribution limit: +$7,500 ($30,000 total)

Traditional and Roth Individual Retirement Account (IRA) Contribution Limits

IRAs are a great tax planning tool because you can make prior year contributions until the tax filing deadline. If you did not hit the $6,000 contribution limit in 2022 (or $7,000 if you are age 50 or older), you can continue to contribute toward it up to the deadline of April 18, 2023.

For 2023, the contribution limit for Traditional and Roth IRAs increased to $6,500. If you are age 50 or older by the end of the year, you can contribute an additional $1,000 as a catch-up contribution, bringing your total contribution limit to $7,500.

You can make contributions to a Traditional IRA up to those limits no matter what your salary is — but depending on how much you make, you might not be able to deduct those contributions from your taxes if you also take part in a 401(k) through your workplace.

If your salary falls within the bands listed below and you participate in a retirement plan at work, you can only make a partial deduction. If your salary is lower you can make a full deduction, and if your salary is higher you cannot make a deduction at all.

• Single filer or head of household: $73,000 – $83,000
• Married couples filing jointly: $116,000 – $136,000
• Married couples filing jointly, only one spouse covered by 401(k): $218,000 – $228,000
• Married couples filing separately: less than $10,000

If you fall within these limits, it’s always a good idea to talk to your Market Street financial advisor to understand what’s deductible and what’s not.

IRA Contribution Cheat Sheet, 2023

Individual contribution limit: $6,500

Catch-up contribution limit: +$1,000 ($7,500 total)

Self-Employed Retirement Plan Contribution Limits

If you are self-employed, you can contribute to a Solo 401(k) or a Simplified Employee Pension (SEP) IRA. 

For Solo 401(k) plans, the contribution limit for 2023 is $66,000, up from $61,000 in 2022. If you are age 50 or older, you can contribute an additional $6,500 as a catch-up contribution, bringing your total contribution limit to $72,500.

For SEP IRAs, the contribution limit for 2023 is 25% of your net self-employment income, up to a maximum of $66,000. It's important to note that contributions must be made by your tax filing deadline (including extensions), so if you are self-employed and haven't established a retirement plan yet, there's still time to do so for the 2023 tax year.

Self-Employed Retirement Plan Contribution Cheat Sheet, 2023

Solo 401(k) contribution limit: $66,000

Solo 401(k) catch-up contribution limit: +$7,500 ($72,500 total)

SEP IRA contribution limit: $66,000 or 25% of compensation, whichever is lesser

Health Saving Account (HSA) Contribution Limits

Much like IRAs, HSAs are an excellent tax planning tool because you can continue to make prior-year contributions up to the deadline of April 18, 2023. If you did not hit your contribution limits in 2022, there’s still time to do so before you file.

The amount you can contribute to an HSA depends on whether you’re enrolled in self-only coverage or family coverage. Be aware that employer contributions count toward the annual limit.

For 2023, the contribution limit for HSAs with self-only coverage is $3,850, up from $3,650 in 2022. The contribution limit for HSAs with family coverage is $7,750, a raise from 2022’s limit of $7,300.

As with certain other plans, if you are 55 or older you may be eligible to make catch-up contributions. This figure is unchanged from 2022, and remains at $1,000.

HSA Contribution Cheat Sheet, 2023

Self-only coverage contribution limit: $3,850

Family coverage contribution limit: $7,750

Catch-up contribution limit: +$1,000

Tips for Maximizing Your Retirement Savings

Now that you know the contribution limits for 2023, here are some tips to help you maximize your retirement savings:

• Start early — The earlier you start saving, the more time your money has to grow through compound interest. Even if you’re just starting out financially, Market Street can help you find opportunities to save through with our Foundations relationship.
• Take advantage of employer matching contributions — If your employer offers a matching contribution, make sure you contribute at least enough to get the full match. People often say that this is free money, and they’re not wrong!
• Consider a Roth IRA — If you expect to be in a higher tax bracket in retirement, a Roth IRA can provide tax-free withdrawals in retirement.
• Increase your contributions over time — As your income increases, consider increasing your retirement contributions to take advantage of the higher contribution limits. A good rule of thumb is that if you get a sizable pay bump, think about putting some of that bigger monthly paycheck toward retirement.
• Seek professional advice — A financial advisor can help you develop a retirement savings strategy that takes into account your individual needs and goals. We’re fortunate that we have some of the brightest financial advisors we’ve ever met here on the Market Street team, and they’re eager to help you at tax time and beyond.

The updated retirement account contribution limits for 2023 let you reassess your retirement strategy and put more into savings, if that’s part of your financial plans. By taking advantage of these contribution limits and following the tips above, you can maximize your retirement savings and plan for a retirement that works for your lifestyle.

Need a hand with your taxes this year? Market Street’s CFPs can work hand-in-hand with your tax professionals so your entire financial plan is represented at tax time. Give us a call and make the most of your tax-saving opportunities.