A workplace 401(k) plan helps you save a substantial amount each year for retirement, but there are annual limits on contributions by you and your employer. The contribution limits for 2023 have been announced by the IRS, and it's important to know what they are so you can plan your retirement savings accordingly.
The 401(k) contribution limit for 2023 is $22,500; if you're 50 or older, that amount goes up to $30,000. You can contribute to more than one 401(k) plan, but your total contributions across all plans cannot exceed these limits. It's also important to note that these limits are subject to change in the future based on inflation.
You can defer $22,500 into your 401(k) for 2023, up from the $20,500 limit in 2022. It may be easier to achieve your 2023 retirement savings goals if you increase your contributions by just a small amount each pay period. For example, if you're paid bi-weekly, increasing your contribution by just $50 per paycheck will add up to an additional $1,300 in your 401(k) by the end of the year.
Americans saving for retirement through a 401(k) account will be able to increase their maximum contributions of pretax wages into it by $2,000 in 2023. This is good news for those who want to save more for retirement and reduce their taxable income at the same time.
Saving for retirement is a top financial priority for many. If you're one of those who has prioritized retirement by opening a Roth 401(k), you'll be happy to know that the contribution limits for 2023 are the same as for traditional 401(k) plans. However, contributions to Roth 401(k) plans are made with after-tax dollars, so they won't reduce your taxable income.
When people are trying to build a career whilst also juggling family and social commitments, it can be very easy to not pay attention to retirement savings. However, it's important to ensure that you're saving enough for your future. Increasing your 401(k) contributions by even a small amount can make a big difference in the long run.
It's also important to understand the contribution limits set by the IRS each year. For 2022, the contribution limit for 401(k) plans is $20,500, and for 2023, it's $22,500. These limits apply to both traditional and Roth 401(k) plans. If you're 50 or older, you can make an additional catch-up contribution of $6,500 per year.
To make the most of your retirement savings, it's important to contribute as much as you can afford to your 401(k) plan. Consider adjusting your contributions for 2023 to take advantage of the increased contribution limits. Remember, the more you save now, the more comfortable your retirement will be.