IRS Announces 2023 401(k) and IRA Limit Increases

November 15, 2022:

 When enrolling participating in employer sponsored retirement plans and individual retirement accounts, it is important to consider how the annual contribution limits set by the IRS are calculated. The limits set  include all plans participated in for the year, not just the current active plan.  If the employee is over the age of 50, he or she would also qualify for an additional  catch-up contribution, however plan investors should be aware that both the maximum contribution and catch-up contribution amounts are subject to change annually.  That said, we thought it might be helpful to share a quick note regarding the IRS’s recent announcement on October 21, 2022, regarding retirement account limits for 2023: 


401(k), 403(b), 457 plans, and Thrift Savings Plan

  • The amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 in 2022. 
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has increased to $7,500, up from $6,500. 
  • In total, participants 50 and over can contribute up to $30,000 ($22,500 + $7,500) beginning in 2023.

Traditional and Roth IRA

  • The limit on annual contributions to an IRA increased to $6,500, up from $6,000 in 2022.
  • The IRA catch-up contribution remains $1,000 for individuals 50 (and is not subject to an annual cost-of-living adjustment).
  • The income phase-out range for taxpayers making contributions to a Roth IRA has increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000. The income phase-out range has increased for married couples filing jointly to between $218,000 and $228,000, up from between $204,000 and $214,000.

In addition to questions surrounding contributions limits, we also notice an increase in inquiries at year-end regarding the differences between traditional and ROTH contributions. That said, we are reposting the below article by our Director of Client Operations, Lori Patterson, which outlines the major similarities and differences within these employer sponsored retirement plans, and welcome any questions our clients may have regarding their employer benefits:


Traditional v. ROTH 401(k)s. Originally Posted October 3, 2017. By Lori Patterson:

When people hear these words, anxiety can set in quickly. Unless you are employed in an industry where you work directly with these types of plans and have developed an understanding of them, it’s likely that you too have reservations about choosing one of these plans. The first step to understanding and choosing the right plan for you begins with understanding the plans and the differences between them.

Opting to invest in a traditional 401(k) and/or a Roth 401(k), over time, has proven to be an effective way to save for retirement. One or both of these plans can be beneficial depending on your individual situation and retirement goals. Many employers offer both types of plans which allow employees to better customize their retirement savings plans.

It may also be helpful to define the basic plan. A 401(k) plan, in general, refers to a retirement plan offered by an employer which allows employees to save for retirement by contributing a percentage or portion of their earnings to the plan and then choosing investment options within the plan. Within the 401(k) plan, the following options can be considered.

A traditional 401(k) plan offers the benefit of pre-tax contributions which reduces the impact of taxes on your net earnings, allowing the opportunity for you to save more for retirement. These funds and the earnings/growth will be taxed when they are withdrawn from the plan, ideally at retirement, when your taxable income will likely be lower. Often times, those in a higher tax bracket will choose this option since they expect to have a decreased income and therefore a reduced tax liability when retired.

A Roth 401(k) plan may offer greater benefits at retirement age. Roth contributions are not considered pre-tax or deductible; however, when the funds are withdrawn at retirement, the contributions and the earnings/growth can be withdrawn tax-free. Often times, people who choose this option are earning lower than or equal to the amount they expect to be earning in the future. Lastly, a Roth 401(k) plan can later be rolled into a Roth IRA, in which case the owner would not be required to take distributions at age 70½ as is the traditional IRA owner, allowing the funds to continue to grow tax-free.

There are some cases in which it may be appropriate to contribute to both types of retirement plans and this can be done within the same 401(k) plan if your employer offers a Roth 401(k) option. If so, your plan’s sponsor or administrator is required to track the contributions that you make separately into each plan for future tax consideration. If you choose to contribute to both plans, the total annual contribution rules still apply.

Although it may seem overwhelming and confusing when trying to understand the differences in the types of retirement plans offered, it is worth the effort to make an educated decision and plan as early as possible for retirement in order to help reach your long term goals.

For additional information to help explain the differences between the two plans please visit: