Great News for Savers in 2023

With the end of the holiday season right around the corner, we start looking ahead to a new year and new financial opportunities that can help impact our goals. Now is a great time to begin planning for 2023 and the perfect opportunity for you to save more in tax-deductible retirement plans.

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Defined Contribution Plans (aka 401(k)-style plans)

For 2023, the IRS made changes to over 60 tax provisions. This includes updates to contribution limits for 401(k) style plans.  For people in a company with a 401(k)-style plan, the max amount you can defer has increased from $20,500 to $22,500. For those age 50 or older, the ‘catch-up’ provision allows for an additional $7,500 (up from $6,500 this year), bringing your total possible contribution to $30,000. This is a great opportunity for employees to increase retirement savings and save additional money on taxes if in a higher tax bracket. For more insight on upcoming tax changes, check out our recent article.

Action: In January, contact your HR department and have them increase your payroll deduction contribution based on the new limits.

Traditional and ROTH IRAs

ROTH and Traditional IRA limits will also increase in 2023. Next year you can contribute up to $6,500, up from $6,000 this year. In addition, if you turn age 50 or older in 2023, you may make an additional $1,000 catch-up contribution. Keep in mind, there are income thresholds you must be under to qualify for contributions. However, these thresholds have also increased for 2023.

Action: If possible, make your full contribution early in January versus making monthly contributions. This gives your money a full 12-month head start on growth.

Backdoor ROTH IRA

If you are not eligible to make a Traditional or ROTH IRA contribution because your income is too high, the Backdoor ROTH IRA may be an option. With this strategy, you make a non-deductible IRA contribution (there are no income limitations), then immediately do a rollover to a ROTH IRA.

Action: Determine if a Backdoor IRA is a good strategy for you. If so, act early in the year.

Every situation is different, so consult your tax or financial advisor before implementing these strategies.


Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of SuccessJ.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaireand 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch GroupConsult your financial advisor before acting on comments in this article.


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