Lessen your tax liability through retirement contributions
One of the easiest and most effective ways to accumulate tax-deferred savings is through contributions to an employer-sponsored retirement plan, such as a 401(k) or 403(b).1 These pre-tax contributions reduce your current taxable income and thereby lower your current tax bill. Some employers offer a match—adding money to your retirement plan equal to a percentage of your contributions.
Additionally, if you are age 50 or older, you can make annual catch-up contributions to IRA accounts and many retirement plans—allowing you to put away even more for retirement. If you’re not participating in your employer’s retirement plan, you may be passing up a valuable retirement savings opportunity.
Consider contributing to a retirement plan at work
Here’s an overview of retirement plan contribution limits for 2023. Of course, such limits are subject to the provisions of your company’s plan.
Employee Contribution Limits for 401(k) and 403(b) Plans
|Year||Maximum contribution||Catch-up contribution for individuals age 50+|
*Note: Special additional catch-up contribution may apply for 403(b) plans.
Consider contributing to an Individual Retirement Account (IRA)
You may want to consider maximizing your contributions to a Traditional IRA as another strategy for potentially reducing your taxable income—and your taxes—as you build assets for retirement. These contributions also grow tax-deferred.2
Another type of IRA to consider is the Roth IRA. While contributions are not tax deductible, qualified withdrawals are generally tax-free. Please talk to your financial and tax professional to learn more about the Roth IRA.
IRA Contribution Limits for 2023 (Traditional and Roth)
Under age 50
Age 50 and over
Determine the deductibility of your contribution
If you plan on contributing to a Traditional IRA, your financial and tax professionals can help you determine if you may be able to deduct all or a portion of the money you contribute. For a general idea, consider these current IRA deduction limits, which assume you are covered by a retirement plan at work. (Note: Deduction limits are less stringent if you are not covered by a retirement plan at work.)
- If your filing status is single or head of household and your modified adjusted gross income is less than $83,000, you may be able to take a full deduction or a partial deduction.
- If your filing status is married filing jointly and your modified adjusted gross income is less than $136,000, you may be able to take a full deduction or a partial deduction.
For complete details about your specific situation, please talk to your tax professional or visit irs.gov.
Take action for your financial future
As you prepare for your financial future, it may make sense to periodically review your retirement savings and investment strategies from a tax perspective.
- Identify tax-savvy opportunities with your financial and tax professionals. They can be good resources for evaluating your tax liabilities and potentially identifying ways of reducing your tax burden in the future.
- Look forward to tax-deferred savings by increasing retirement account contributions today if it makes sense for you and your personal situation.
Action is everything. Talk to your financial and tax professionals about tax-smart strategies for retirement today.
1 Keep in mind, the purchase of an annuity within a retirement plan or account does not provide additional tax-deferred treatment of earnings. However, annuities do provide other features and benefits that may be important to you, including options for guaranteed lifetime income and a guaranteed death benefit for your beneficiary.
2 Withdrawals are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply.
Please seek the advice of an independent tax professional or attorney for more complete information concerning your particular circumstances and any tax statements made in this material.
Source for contribution limit data shown above: IRS.gov.