IRA limits rise in 2023. Here’s what retirement savers need to know.

(Morri Bachmann)

Building a nest egg is an important thing to do if you want to retire in a comfortable way. Sure, you can tell yourself you’re going back to Social Security — but doing so could lead to a serious income shortfall in the future.

Now when it comes to saving for retirement, you have options. If your employer sponsors a 401(k) plan, they may pay for the contribution. That’s because many of the companies that offer these plans also match workers’ contributions to some degree. Additionally, your 401(k) comes with generous contribution limits, so if you’re able to dedicate a large portion of your income to retirement savings, you have a solid chance.

But not everyone has access to a 401(k). Maybe you work for a company that doesn’t offer one. Or maybe you’re self-employed so you have to fund your retirement savings without the help of a matching company.

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If so, the good news is that you can do a good job for yourself in saving on Irish Republican Army. And next year, the annual contribution limits for IRAs will go up, so you’ll have a greater chance of raising money for retirement — and enjoying some tax breaks along the way.

You can save more in your IRA next year

In 2022, the annual contribution limit for 401(k) plans increased by $1,000. But the contribution limit for IRAs remained the same in 2021 — $6,000 for workers under 50, and $7,000 for those 50 and older.

Next year, the annual IRA contribution limit will increase from $6,000 for savers under 50 to $6,500. However, the catch-up limit will remain fixed at $1,000, meaning that savers age 50 and older can put up to $7,500 into an IRA in 2023.

Interestingly, now, the IRS just announced that catch-up contributions for older 401(k) savers will increase from $6,500 to $7,500. Unfortunately, catch-up IRAs are not subject to cost-of-living adjustments, so those will stay in place. But either way, if you are able to max out your IRA in 2023, it pays to do so. The more money you save in the near term, the better your ability to retire.

It is beneficial to cut this tax exemption

Retirement with a solid nest egg isn’t the only reason to try to maximize your IRA next year. You should also aim to take advantage of the opportunity to get a significant tax break.

Traditional IRA contributions go tax-free, so if you can put $6,500 into your IRA next year, that’s $6,500 of income the IRS won’t charge you. Now if you decide to finance a Ruth IranYou will not get this immediate tax credit. but you are will Enjoy tax-free investment gains in your retirement plan, as well as tax-free withdrawals once retirement begins.

Additionally, Roth IRAs are the only tax-advantaged retirement plan that is not subject to savers Minimum Distribution Required. This means you get a greater say in your savings — and the option to continue to benefit from tax benefit growth into your later years.

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