How Much Can You Invest in Your Retirement Each Year?

Investing for retirement is a must-do if you hope to enjoy your golden years in style. Many investors turn to tax-advantaged retirement accounts to supercharge their savings. However, these special accounts impose regularly-adjusted limits on how much you can invest each year.

Employer-sponsored plan contribution limits 

Historically, employer-sponsored retirement plans referred to pensions, which paid out based on your salary and years of service. In recent decades, many employers turned to other offerings to lower their costs.

Today, “defined contribution plans” are more common. These include employer-sponsored accounts like 401(k)s, 403(b)s, and 457s. Federal employees have a similar option known as the Thrift Savings Plan.

The IRS sets similar caps on both employee and total contributions for all these plans. In 2023, the most you can contribute from your own paycheck is $22,500.

Employers that offer 401(k) matching can contribute up to the total plan limit, capped at 100% of your salary or $66,000. (Whichever is less.) Employees over 50 can also make extra “catch-up contributions” up to $7,500.

(If your employer doesn’t offer a match, you can still contribute up to the $66,000 cap. However, anything above the $22,500 is not tax-deductible.)

2023 Contribution Limits for Employer-Sponsored Accounts

Self-employed contribution limits

If you’re self-employed, freelance, or work for a small business, you don’t have access to the same employer-sponsored retirement plans. Instead, your options include self-employed and small business plans.

Exactly which you choose depends on your business structure and employment status. For instance, sole proprietors or those who employ their spouse may prefer a solo 401(k). Small businesses, meanwhile, may prefer an SEP or SIMPLE IRA.

Each type of accounts sets its own contribution limits and requirements, as outlined below:

2023 Contribution Limits for Small Business and Self-Employed Accounts

*Solo 401(k) participants act in two capacities: Owner and employee. Each has their own contribution limits.

**Self-employed individuals must follow specific calculations.

Traditional and Roth IRA contribution limits

Most individuals, regardless of employment status, can also open an individual retirement account (IRA) to supplement their retirement savings.

Both Roth and traditional IRAs cap their contributions at $6,500 in 2023. Individuals over 50 may contribute an extra $1,000 in catch-up contributions.

2023 Contribution Limits for Traditional and Roth IRAs

Income phase-out limits

The IRS also sets specific income phase-out limits for traditional IRAs and income caps for Roth IRA contributions.

While your filing and employment status matters, traditional IRA phase-out limits in 2023 begin at:

  • $73,000 to $83,000 for single filers
  • $117,000 to $137,000 for joint filers
  • $218,000 to $228,000 for joint filers who aren’t covered by a workplace plan, but their spouse is

The 2023 Roth IRA income caps are set between $138,000 and $153,000 if you’re single or head of household. Joint filers’ income caps begin between $218,000 and $228,000.

Supplement your retirement investments with Q.ai 

Retirement savings accounts are a fantastic savings option, but they’re not without their drawbacks.

For people who need (or want) to have more flexibility with their investment strategy and fewer limits on their accounts, Q.ai has just the thing. We use the power of AI to make smarter picks in a range of easy, fun and diverse Investment Kits.

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