Unprecedented 401(k) Boost For 2023
Starting next year, you can contribute up to $22,500 into your 401(k), 403(b), most 457 plans, or the Thrift Savings Plan for federal employees. That’s $2,000 – or roughly 9.8% – more than the current $20,500 federal contribution limit. The jump is mainly due to inflation, to which the contribution limits are indexed.
The catch-up contribution in the 401(k) and other workplace plans – the amount plan participants who are 50 and older may save on top of the federal contribution limit – also will get a big boost. In 2023, it will rise to $7,500, up 15.4% from $6,500 today. That means if you’re 50 or older you can contribute up to $30,000 in 2023. And that doesn’t count any matching contributions your employer may kick in.
While the increases could help those hoping to power charge their retirement savings, most 401(k) participants do not save anywhere near the federal limit. Based on an analysis of the 401(k) plans it provides employers, Vanguard estimates that only 14% of participants maxed out their contributions in 2021, and only 16% of those eligible to make catch-up contributions took advantage.
IRA contribution limits have also been increased, and there may be more changes coming, so be sure to read this article.
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