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Higher IRA Contribution Limits Create Opportunity for SDIRA Investors

Higher IRA Contribution Limits Create Opportunity for SDIRA Investors

Estimated Reading Time: 3 minutes

The IRS recently released their 2023 IRA contribution limits. And for the 1st time since 2019, we’ve seen those limits increase. This means you have the opportunity to invest more than ever before in your tax-advantaged retirement accounts.

These increases, driven by rising costs associated with inflation, are the largest investors have ever seen. Keep reading to find out what the new contribution limits are, updated phase-out ranges, and ideas for investment that go beyond the stock market.

2023 IRA Contribution Limits

In 2023, taxpayers will be able to contribute $6,500 to traditional and Roth IRAs, up from 2022 IRA contribution limits of $6,000. The catchup contribution for those age 50 or older will remain at $1,000. Taxpayers who contribute to 401(k)s will now be able to contribute $22,500.

For those over age 50 who contribute to a 401(k), the catch up contribution limit has increased to $7,500. Individuals investing through a SIMPLE retirement account will now be able to contribute $15,500. The limit for catch up contributions to SIMPLE IRAs increased to $3,500. For SEP IRAs, employer contribution limits are up to 25% of compensation, with the maximum contribution limit increasing to $66,000. 

2023 IRA Phase-Out Ranges Have Increased Too

Phase-out ranges incrementally limit how much you can contribute as your income approaches a maximum amount. Consult your tax advisor for additional details on how to calculate your maximum contribution based on your income. 

In addition to increased contribution limits, the income limits for deducting traditional IRA contributions have also increased, depending on filing status. For single filers, the range begins at $73,000 and goes to $83,000. For married couples filing jointly, the range depends on if the contributing spouse is also covered by a workplace retirement plan.

If the contributing spouse is covered, the phase-out range is $116,000 to $136,000. If the contributing spouse is not covered by a workplace retirement plan, the range is $218,000 to $228,000.

Phase-out ranges for Roth IRA contribution eligibility have also increased. For single filers, the range is now $138,000 to $153,000. For married couples filing jointly, that number goes from $218,000 to $228,000. Knowing these phase out ranges, as well as your modified adjusted gross income is crucial for effective planning.

To learn more about the specific details on the contribution limits and phase-out ranges, see the IRS contribution limits chart. For a PDF version, download our chart outlining the changes and contribution limits for 2022 and 2023

Got questions about opening and contributing to a self directed IRA (SDIRA) in particular? Request a free consultation from one of our experienced IRA specialists.

Benefits of Higher Contribution Limits

Investors using IRAs to save for retirement stand to be greatly advantaged by these higher limits.

Leverage your current income by investing more of today’s money for tomorrow’s gain. Contributing more money to your traditional IRA means you can invest more money with the potential for tax-deferred growth. Higher contribution limits for Roth IRAs mean you can contribute more post-tax money to your retirement account. This higher investment will then grow tax-free, resulting in greater gains when you retire. 

Whether you prefer to contribute to a Roth IRA or a traditional IRA, increased contribution limits present an incredible opportunity for savvy investors.

Higher contribution limits mean that you, as an investor, have more buying power. With the potential to save more in retirement accounts this year, you can purchase more assets. It could also help to offset the impact that inflation will have on rising costs during retirement. 

Putting these additional contributions into alternative investments allows you to invest in assets with the potential for greater return (and risk). It can lead to a greater ability to purchase investments tomorrow and far into the future.

Leveraging Your Expertise with Alternative Assets

There are a variety of alternative investment options that can help you maximize your returns and diversify your portfolio. With a self directed IRA (SDIRA), you can invest in alternative assets that fit with your interests and experience. Some popular options include real estate, private equity, precious metals, and LLCs. 

Real estate can give investors a way to grow their accounts with a new income stream fueled both by rental income and appreciation. Private equity provides the option to generate passive income that feeds into your tax-advantaged retirement accounts. Precious metals, traditionally a popular asset during downturns, can provide diversification with a finite, physical asset. Using an LLC to invest with an SDIRA can provide greater flexibility and reduced administrative fees. 

The only investment restrictions the IRS places on items held in an SDIRA are collectibles, life insurance, and S corporations. Beyond these rules, you can invest in almost any alternative asset you like. However, regardless of how you invest, be sure to carry out your own due diligence since SDIRA providers are passive IRA custodians, meaning they aren't able to vet the suitability of any investment.

Invest in Your Future with an SDIRA

Higher contribution limits are setting the stage for greater savings in 2023. And with inflation fueling a challenging investment landscape, now is the perfect time to reassess your retirement strategy. For more details about the types of retirement accounts you can self-direct, see Entrust’s Self-Directed Account Types.

SDIRAs provide practically unlimited options when it comes to growing your retirement portfolio. They give you the power to invest your funds when, where, and how you like – all in a tax-efficient manner. 

Ready to contribute to an IRA and take advantage of these increased limits? Open a self directed IRA. Entrust is a leading IRA custodian* and recordkeeper, with over 40 years in the business of self direction. Join us and start building your perfect portfolio today.

*TETC, an affiliate of Entrust, is The Entrust Group's custodian and has delegated custodial services responsibilities to Entrust.


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