Contributing to a retirement plan is one of the best tax shelters available to people during their working years. Contributions made to non-Roth accounts are tax-deductible and grow tax deferred. With the Roth option, you give up a current year tax deduction in exchange for tax-free growth.
Most retirement plans offered by healthcare practices have two components:
- Salary deferrals need to be made through your payroll during the calendar year
- Employer contributions are due by the filing deadline (including extensions) for the practice tax return filed next winter
If your practice offers a 401k plan or a SIMPLE IRA, please take a few minutes to look at a recent pay stub to ensure you are on track to max out the salary deferrals for 2023 as follows:
For 2023, you can contribute up to $22.5k into a 401(k) plan through salary deferrals, up from $20.5k in 2022. Anyone 50 or older by December 31, 2023 can contribute an extra $7,500 into their 401(k) through salary deferrals, for a total annual contribution of $30k. Please note that you don’t need to actually wait until your 50th birthday to be able to start making these catch-up contributions.
SIMPLE’s work just like 401(k) plans, which means it’s up to each employee to fund the bulk of his or her retirement savings account through salary deferrals. For 2023, the maximum contribution into your SIMPLE as salary deferrals is $15.5k. Anyone 50 or older by December 31st can put away an additional $3.5k in 2023, for a total annual salary deferral of $19k.
Now is the Time to Re-Set Your 2023 Salary Deferrals:
Most people won’t be able to max out these tax-advantaged retirement options unless they get on a budget and put away a set amount of money each month. Please note that if you switched jobs or work for more than one employer that offers a 401k or SIMPLE IRA, the total salary deferrals you can make in the aggregate to all the plans this year is capped at $22.5k (or $30k if 50 or older by 12/31/23).
With the summer half over, now’s the time to make sure you’ll max out your salary deferrals for 2023.