5 IRS Changes in 2023 That Affect Your Retirement Accounts

The U.S. tax code can be confusing, especially when considering the steady stream of changes that seem to appear each year. In 2023, a slew of new rules could impact your efforts to build a larger nest egg that will see you through your retirement years.

Following are a few important changes to keep in mind as you save for retirement this year.

Many employers offer a retirement plan to their employees, usually a 401(k), 403(b), or 457 plan. The maximum you can invest in these plans is $22,500 in 2023, which is a $2,000 bump from 2022.

If you are unaware of this change, it’s possible you are not saving for retirement as robustly as you could be. Talk to your human resources department to make sure you are contributing the maximum to your account. If you are not, consider bumping up the amount of money you contribute so you reach the full $22,500 maximum.

Pro tip: If you cannot contribute the maximum to your plan, at least try to contribute enough to get the full company match that your employer offers. 

Many deductions and credits that the IRS offers are subject to phase-out ranges. This means that once your income crosses a specific threshold, the value of the deduction or credit you are eligible for slowly diminishes until it disappears altogether.

The phase-outs for deductions of traditional IRA contributions have changed in 2023. The phase-out ranges in 2023 are $73,000 to $83,000 for single savers with a workplace retirement plan. The ranges are $116,000 to $136,000 for married couples filing jointly for the spouse who has a workplace retirement plan and makes an IRA contribution.

Typically, taxpayers can deduct the full $6,500 that they are allowed to contribute to a traditional IRA in 2023, but these phase-out ranges may change that amount for some people. Check the IRS website for more details, and remember to factor in these ranges before deciding how much to contribute to a traditional IRA this year.

If your income is higher, you might be restricted from making a full contribution to your Roth IRA. Fortunately, the phase-out ranges for Roth IRA contributions are higher in 2023. The phase-out ranges are $138,000 to $153,000 for single savers and $218,000 to $228,000 for married couples filing jointly.

So, if your income falls into those ranges, you will only be able to contribute a reduced amount of retirement savings to your Roth IRA, not the $6,500 that other taxpayers are allowed to contribute. Once your income exceeds the amounts above, you will not be eligible to make any type of Roth IRA contribution in 2023.

Pro tip: Check out these smart money moves if you're making more than $5,000 per month.

Technically, a health savings account is not a retirement plan. Instead, it is a place where savers of all ages can contribute tax-advantaged savings that can be withdrawn tax-free to pay for medical expenses.

However, many people use these accounts to save as much money as they can so that they will have a pool of funds to tap for health care costs after they retire.

The good news is that the contribution limits to HSA plans are increasing in 2023. This year, you can contribute a total of $3,850 if you have self-only medical coverage. If you have family coverage, you can contribute up to $7,750.

Remember that you must have a high-deductible health plan to be eligible to contribute to an HSA.

A SIMPLE IRA — short for "Savings Incentive Match Plan for Employees" — is a type of retirement plan often used by small businesses with fewer than 100 employees. Workers can contribute to these plans and build retirement savings. The employer also must contribute to worker accounts.

Many small businesses use a SIMPLE IRA because they are less costly to maintain than a traditional retirement plan. For 2023, the amount you can contribute to a SIMPLE IRA is $15,500, up from $14,000 in 2022.

IRS rules constantly change, and you need to stay on top of these shifting winds to avoid money stress when you retire. If you are unsure about how rules may be different in 2023, check in with your accountant.

Staying on top of these changes can help ensure you do not run afoul of IRS rules, you contribute the maximum to your nest egg, and you're able to supplement your social security.