2022 was a devastating year financially for the average American. Over $9 trillion of wealth was erased from the market, runaway inflation crushed buying power, and aggressive rate hikes made borrowing impossible. In response to this unprecedented economic fallout, the Internal Revenue Service (IRS) has increased the annual contribution limits for individual retirement accounts (IRA) for 2023. In other words, investors have some financial breathing room to make up for the damage caused by the previous year.
2023 IRA Contribution Increases
On November 21, 2022, the IRS announced adjustments to the 2023 individual contribution limits for IRAs. More specifically, the annual contribution cap is extended to $6,500 which is a $500 jump from standard limits. The ceiling for catch-up contributions for individuals older than 50 increased by the same amount, allowing seasoned investors to move up to $7,500 into their retirement accounts.
Why did the IRS adjust the 2023 contribution limits?
These contribution expansions are designed to offset the detrimental effects of soaring inflation which is responsible for a dramatic increase in the cost of living. With inflation reaching a steep 8.2% over the last year, the government is forced to make sweeping adjustments across agencies to reflect the rise in living costs. In a sense, it’s the government’s way of acknowledging partial responsibility for record-setting inflation without directly admitting it.
Other 2023 IRA Changes You Should Know About
Contribution increases aren’t the only important IRA changes investors should know about heading into 2023. The most recent federal spending bill which totaled $1.7 billion included some additional IRA changes.
Previously, withdrawals from an IRA before reaching 59 and a half years old would be penalized. The government would levy a 10% tax on the withdrawn amount and tack it onto the individual’s taxable income for the year.
The Secure 2.0 Act of 2022, which was passed in tandem with the federal budget, now permits Americans to withdraw $1,000 annually for “emergencies” with three years to pay it back without any penalties. Notably, the only proof required to demonstrate an emergency is personal testimony.
How This Impacts Gold IRA Contributions
Gold backed IRAs are subject to the same contribution regulations as all other retirement accounts which means gold IRA holders benefit from these limitation increases too. In other words, you can add up to $6,500 ($7,500 in the case of investors older than 50) worth of precious metal assets to your self-directed precious metals IRA at any time during the 2023 tax year.
How to Make an Annual Contribution to Your Gold IRA
Making contributions to your gold IRA is simple when working with Scottsdale Bullion & Coin. Our IRA liaisons and advisors will take care of all the paperwork, help you make payments to the Trust Company, and support you in choosing the right precious metal assets to build your nest egg.