50 and Older? Here’s Your Chance to Catch Up on Retirement Saving
April 7, 2023
If you are age 50 or older and still working, you have a valuable opportunity to super-charge your retirement savings while managing your income tax liability. Catch-up contributions offer the chance to invest amounts over and above the standard annual limits in IRAs and workplace retirement plans.
2023 Limits
In 2023, the IRA catch-up limit is an additional $1,000 over the standard annual amount of $6,500. Participants in 401(k), 403(b), and government 457(b) plans can contribute an extra $7,500 over the standard limit of $22,500. For SIMPLE plans, the catch-up amount is $3,500 over the standard limit of $15,500.1
Tax Benefits
Contributions to traditional workplace plans are made on a pre-tax basis, which reduces the amount of income subject to current taxes. Contributions to traditional IRAs may be deductible, depending on certain circumstances.
If you are not covered by a retirement plan at work, your traditional IRA contributions are fully tax deductible. If you are covered by a workplace plan, you may deduct the full amount if your adjusted gross income is $73,000 or less as a single taxpayer or $116,000 or less if you’re married and file jointly. If you are not covered by a workplace plan but your spouse is, you are eligible for a full deduction if you file jointly and your income is $218,000 or less.2
Contributions to Roth accounts do not offer immediate tax benefits, but qualified distributions are tax-free at the federal, and possibly state, level. A qualified distribution is one made after the account has been held for five years and the account owner reaches age 59½, dies, or becomes disabled.
Distributions from traditional accounts prior to age 59½ and nonqualified distributions from Roth accounts are subject to ordinary income taxes and a 10% penalty, unless an exception applies.
Still Time for 2022 Contribution
If you qualify, you can make a deductible IRA contribution for 2022 up until the tax filing deadline on April 18, 2023. The total contribution limit for someone age 50 or older in 2022 is $7,000. You can open a new IRA or invest in a current one, but be sure to specify the contribution is for the 2022 tax year. The income limits for a full deduction in 2022 are $68,000 for single taxpayers, $109,000 for married taxpayers filing jointly, and $204,000 for taxpayers who aren’t covered by a workplace plan but their spouse is.2
1Participants in 403(b) and 457(b) plans may benefit from other catch-up contributions specific to each plan type. Participants in government 457(b) plans cannot combine age 50 catch-up contributions with other catch-up contributions. When calculating allowable annual amounts, contributions to all plans except 457(b)s must be aggregated.
2Phaseout limits apply. Married couples filing separately cannot take a full deduction. You must have earned income at least equal to your IRA contribution. Talk to a tax professional.
*Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2023. Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union Members. SEC Marketing Disclosure.
PPP Forgiveness Application Deadline
Congress passed The Economic Aid Act which changed the deferment period from 6 months post covered period to 10 months post covered period. For example, if your covered period ended June 30, 2021, under the new guidelines the earliest your first loan payment wouldn’t be due until April 2022, and you have until then to request forgiveness. Please use the following calculation to help you identify when your forgiveness will be due:
- PPP borrowers may select a covered period anywhere from 8 weeks to 24 weeks.
- RCU is automatically calculating your loan due date based on a 24-week covered period, if you intend on using a shorter covered period please inform us immediately as this will impact your due date.
- Your correct deadline will be reflected in your online banking account.
If all or part of your PPP loan is not forgiven, your first loan payment will be due the first of the following month after a decision is made by the SBA.
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