If you’re actively saving for retirement, now’s a good time to review the contributions made so far this year to your retirement accounts to see if you’re on track to meet your 2023 retirement savings goals.
There are many types of retirement accounts. The two most popular are individual retirement accounts (IRAs) and 401(k) plans (or similar plans). If you’re self-employed, own a small business, or work for a small business, perhaps your retirement savings are tucked in a solo 401(k), Simplified Employee Pension (SEP) IRA, or Savings Incentive Match Plan for Employees (SIMPLE) IRA. You can also use a health savings account (HSA) to save for retirement.
However, which type of retirement account you’re using isn’t the most important thing, as long as you’re stuffing as much money as you can handle into one or more of them. That’s because each account comes with its own blend of tax breaks that makes their use a no-brainer for anyone saving for retirement.
Immediate tax breaks are available for contributions to some of these accounts, and all of them offer either tax-free or tax-deferred growth (depending on whether it’s a “traditional” or “Roth” account). There’s even a special tax credit—the Saver’s Credit—that’s worth up to $1,000 ($2,000 for married couples filing a joint tax return) for low- and moderate-income retirement savers.
So, what should you do near the end of each year to make sure you’re taking full advantage of these retirement accounts? At this time of year, you should be focusing on two things: The limits and the deadlines for making contributions to your retirement accounts for the 2023 tax year.
So, to ensure you’re making the most of your retirement dollars, let’s go over the 2023 contribution limits and deadlines for all the most common types of retirement accounts.
401(k) and Similar Plans
A 401(k) plan is a tax-advantaged account offered by businesses to help eligible employees save money for retirement. Employees who choose to participate in the plan can contribute to their personal 401(k) account through payroll deductions.
Don’t have a 401(k) plan at work? Maybe your employer offers a 403(b) or 457 plan instead. If you work for the federal government, there’s the Thrift Savings Plan. These are all similar to a 401(k) plan.
2023 Contribution Limits for 401(k) and Similar Plans: For 2023, the maximum amount employees under 50 years old can put in a 401(k) or similar account is $22,500.
Workers aged 50 and older can also put in an additional $7,500 in “catch-up” contributions (for a total of $30,000). A special rule for 457 plan participants within three years of their full retirement age increases the catch-up contribution limit to $22,500 (i.e., double the basic max).
You also can’t contribute more than your compensation for the year.
These limits apply to all your 401(k) or similar accounts. So, for example, if you switched jobs this year and contribute to two separate accounts in 2023, the total amount can’t exceed the $22,500 or $30,000 cap.
In addition, if your employer offers a matching contribution, the combined total of employee and employer contributions to your account in 2023 can’t exceed $66,000, or $73,500 for people making catch-up contributions (other than for 457 plans).
(What about next year? We have all the 401(k) limits for 2024, too.)
Deadline for 2023 401(k) Plan Contributions: If you haven’t yet maxed out your 401(k) this year, you don’t have much time left. You only have until Dec. 31, 2023, to plunk more money in your 401(k) account for the 2023 tax year.
However, contributions to your 401(k) account are taken out of your paycheck and deposited into your account by your employer. You can’t just send money to the 401(k) plan administrator on your own and have it deposited into your account (as you can with an IRA). If you’re not sure how to have your 401(k) contribution increased, contact your employer’s HR department or the plan administrator.
IRAs
An IRA is a retirement savings account you set up on your own through a brokerage firm. You can open a traditional IRA or a Roth IRA, and each option has its own tax advantages.
You can fund your IRA with an ACH transfer from your bank or a personal check. Bank transfers can be made online through your brokerage account or you can send a check directly to your brokerage firm.
You can also roll over funds from an existing retirement account into an IRA.
2023 Contribution Limits for IRAs: When compared to 401(k) plans, the contribution limits are much lower for IRAs, and can even be reduced (potentially down to $0) for Roth IRA contributions if your income is too high.
For the 2023 tax year, you can only put $6,500 in an IRA if you’re under age 50. If you’re at least 50 years old, you can top that off with an extra $1,000 catch-up contribution. As with 401(k) plans, the annual limit is a combined limit that applies to all your IRAs.
This year’s annual contribution limit for Roth IRAs starts to phase out if your modified adjusted gross income is:
- $218,000 to $228,000 if your tax filing status is married filing jointly or surviving spouse
- $138,000 to $153,000 if your filing status is single, head of household, or married filing separately and you didn’t live with your spouse at any time during the year
- $0 to $10,000 if your filing status is married filing separately and you lived with your spouse at any time during the year
(Looking ahead to next year? Check out all the 2024 IRA contribution limits.)
Deadline for 2023 IRA Contributions: If you’re a procrastinator, the good news about IRAs is you actually have until April 15, 2024, to put money in an IRA for the 2023 tax year (April 17 for residents of Maine and Massachusetts).
But why wait? If you can swing it, the better option is to contribute to an IRA before the end of the year and start reaping the benefits of tax-deferred growth (traditional IRA) or tax-free growth (Roth IRA) right away.
Health Savings Accounts
HSAs are primarily used to offset medical costs now and in the future. However, once you turn 65, money in an HSA can be used for any purposes without penalty. As a result, many people use HSAs as a supplemental retirement savings account.
2023 Contribution Limits for HSAs: For 2023, the HSA contribution limits are:
- $3,850 if you have self-only coverage under a high-deductible health plan (HDHP)
- $7,750 if you have family coverage under an HDHP
If you’re at least 55 years old at the end of the year, an additional $1,000 catch-up contribution is allowed.
(If you’re selecting next year’s health care benefits now, you’ll also want to know the 2024 HSA contribution limits.)
Deadline for 2023 HSA Contributions: As with IRAs, you have until April 2024 to stash money in an HSA for the 2023 tax year. But, again, you’re losing out on tax-free growth by putting it off until then.
Related: How to Invest HSA Funds
Solo 401(k) Plans
You can open a solo 401(k) if you’re self-employed or own a business with just one employee who is your spouse. (Solo 401(k) plans are sometimes called one-participant 401(k) plans, individual 401(k) plans, or uni-401(k) plans.)
Solo 401(k) plans are basically “regular” 401(k) plans, but as a self-employed person or small business owner you can make contributions as both an employer and an employee.
2023 Contribution Limits for Solo 401(k) Plans: You can contribute up to $22,500 to a solo 401(k) as an employee in 2023 if you’re under age 50, or up to $30,000 if you’re aged 50 and over.
You can also contribute up to 25% of your compensation as an employer in 2023, but the combined total of all 2023 contributions can’t exceed $66,000, or $73,500 if you’re at least 50 years old.
Deadline for 2023 Solo 401(k) Plan Contributions: The deadline for contributing to a solo 401(k) is a bit different than for regular 401(k) plans. You generally have until April 15, 2024 (April 17 for residents of Maine and Massachusetts), to fund a solo 401(k) for the 2023 tax year.
However, if you request an extension to file your 2023 federal income tax return, you’ll have until Oct. 15, 2024, to put money in a solo 401(k) account and have it count toward your 2023 limit.
SEP IRAs
Like solo 401(k) plans, SEP IRAs are available to small businesses owners and self-employed people. If you’re self-employed, you simply contribute to your own SEP IRA. However, if you’re a business owner with employees, you must also set up and contribute to a SEP IRA for each eligible employee. The employees can’t contribute their own money to their account, though.
In all cases, contributions are based on a percentage of the account holder’s compensation. The self-employed person or business owner sets the percentage each year. However, for business owners with employees, the contribution percentage must be the same for all eligible workers.
2023 Contribution Limits for SEP IRAs: The annual contribution limit for SEP IRAs is fairly straightforward. For 2023, total contributions to a SEP IRA can’t exceed $66,000 or 25% of the first $330,000 of compensation, whichever is lower.
Catch-up contributions aren’t allowed.
(We have the 2024 SEP IRA contribution limits, too.)
Deadline for 2023 SEP IRA Contributions: The deadline for SEP IRA contributions is the same as the deadline for solo 401(k) deposits. For 2023 contributions, you have until April … or until Oct. if you extend the filing due date for your 2023 return.
SIMPLE IRAs
A SIMPLE IRA is another option for self-employed people and small businesses owners (generally up to 100 employees) looking for a retirement savings vehicle. Unlike SEP IRAs, both employers and employees can contribute to a worker’s SIMPLE IRA.
In fact, employer contributions are actually required with SIMPLE IRAs.
2023 Contribution Limits for SIMPLE IRAs: For 2023, an employer must contribute one of the following to each eligible employee’s SIMPLE IRA account:
- A dollar-for-dollar match of the employee’s contribution, up to 3% of the employee’s compensation
- 2% of the first $330,000 of the employee’s compensation
In addition, workers under 50 can contribute up to $15,500 to a SIMPLE IRA for the 2023 tax year. Catch-up contributions up to $3,500 (for a total of up to $19,000) are allowed for 2023 if you’re 50 or older.
Deadline for 2023 SIMPLE IRA Contributions: When contributions are due depends on the type of contribution. As with 401(k) plans, contributions for 2023 must be made by Dec. 31, 2023. Employee contributions are made through payroll deductions (again, like 401(k) contributions). So, if you want to increase your contribution amount, contact your employer to see how that’s done.
Employers have more time to complete the mandatory contributions to their employees’ SIMPLE IRA accounts. Those contributions are due by the deadline for filing the business’s federal income tax return (including extensions) for the taxable year for which the contributions are made.
