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Maximize Contributions

It is important to maximize retirement account contributions for several reasons. Here are the top 3.

  1. Tax benefits: Retirement accounts such as traditional IRAs, Roth IRAs, and 401(k) plans offer tax benefits that can help you reduce your current tax bill and save more for retirement. For example, contributions to a traditional IRA or 401(k) plan are made on a pre-tax basis, which means you don't pay taxes on that income until you withdraw it in retirement. Roth IRA contributions are made on an after-tax basis, but qualified withdrawals are tax-free.

  2. Compound interest: Retirement savings grow over time thanks to the power of compound interest. By contributing as much as possible to your retirement accounts early on, you give your savings more time to grow and compound over the course of your career.

  3. Retirement security: Maxing out your retirement account contributions can help ensure that you have enough savings to support your lifestyle in retirement. With the cost of living rising every year, it's important to save as much as possible to avoid running out of money later in life.

IRAs

  1. The contribution limit for Traditional and Roth IRAs remains the same as in 2022: $6,000 for individuals under the age of 50 and $7,000 for individuals who are 50 or older.

  2. The income limits for making contributions to a Roth IRA are also the same as in 2022. For individuals, the contribution limit phases out between $129,000 and $144,000 of modified adjusted gross income (MAGI). For married couples filing jointly, the contribution limit phases out between $204,000 and $214,000 of MAGI.

401k

​For the year 2022, the contribution limit for a 401(k) plan is $20,500 for individuals under age 50. For individuals who are age 50 or older, there is an additional catch-up contribution limit of $6,500, which brings the total contribution limit to $27,000. It's important to note that some employers may have their own contribution limits, so be sure to check with your employer to see if there are any additional restrictions or rules you need to be aware of.

SIMPLE IRA

For the year 2023, the contribution limits for a SIMPLE IRA (Savings Incentive Match Plan for Employees) are:

  • Employee contributions: Up to $14,000 (up from $13,500 in 2022) if you are under age 50, or up to $16,000 (up from $16,500 in 2022) if you are age 50 or older by the end of the calendar year.

  • Employer contributions: Employers are required to make either a matching contribution of up to 3% of an employee's compensation or a non-elective contribution of 2% of an employee's compensation, regardless of whether the employee makes contributions.

Solo 401k

For the year 2023, the contribution limits for a Solo 401(k) plan are:

  • Employee contributions: Up to $19,500 (up from $19,000 in 2022) if you are under age 50, or up to $26,000 (up from $25,500 in 2022) if you are age 50 or older by the end of the calendar year.

  • Employer contributions: In addition to the employee contribution limits, the employer can also make a profit-sharing contribution of up to 25% of compensation, up to a maximum combined employee and employer contribution of $64,500 (up from $64,000 in 2022) for individuals under age 50, or $71,500 (up from $70,500 in 2022) for individuals age 50 or older by the end of the calendar year.

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