Todd Talk: 2023 Retirement Plan and Gift Tax Update

Todd Rosenfeld, Chief Learning Officer at STC, provides insights into tax law and retirement plan changes effective 2023 which could affect licensing examinations such as the SIE Securities Industry Essentials exam, the Series 6 and Series 7, NASAA exams the 63, 65 and 66 and MSRB tests such as the 52 and 53.

Retirement Plan Changes

  • Individual Retirement Accounts (IRAs) – The contribution limit for IRAs increased in 2023 to $6,500 per year. For people ages 50 and over, the annual contribution limit increased to $7,500 in 2023.
  • 401(k) Plans, 403(b) Plans and 457 Plans – As a reminder, 401(k)s are for employees of private companies; 403(b) plans are for teachers and nonprofit employees; and 457 plans are for state and local workers.

The annual tax-deductible contribution amount increased to $22,500 per year in 2023, with an extra $7,500 for the catch-up if you’re age 50 and over, making the total if you’re 50 or over $30,000 per year.

  • Simplified Employee Pension (SEP) IRAs – You know that SEP IRAs are used by  people working in small companies who want to have another version of a retirement plan. In 2023, the annual tax-deductible contribution limit increased to 25% of the employee’s income, with a maximum of $66,000 per year.

Tax Law Changes

The Gift Tax Law annual exclusion amount increased in 2023 to $17,000 per year. This is important because the amount is tied to the amount of after-tax dollars you can contribute to a 529 college savings plan. If you want to front-end load five years in one year, that contribution would be $85,000. So, two individuals filing jointly per year would be 17 times two or $34,000, or $85,000 times two for $170,000 if they both wanted to front-end load the 529 plan.

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