Retirement savings continue to be an integral factor in one’s ability to live comfortably in retirement, and as of January 1, 2023 you will be able to save a little bit more on an annual basis. The IRS has released its 2023 cost of living retirement savings adjustments. The changes for common retirement plans are listed below.
2023 401(k) and 403(b) Contributions Limits
- Employees participating in their company sponsored 401(k) or 403(b) plan have a new contribution limit of $22,500.
- The contribution limit for participants over age 50 is $30,000, which includes a $7,500 catch-up limit.
- The highly compensated employee (HCE) threshold will increase to $150,000.
- The maximum amount that an employer can use when calculating matching contributions for employees’ 401(k) or 4013(b) accounts, called the annual compensation limit, will increase to $300,000.
2023 Simple 401(k) and Simple IRA Contribution Limits
- Employees participating in their company sponsored Simple 401(k) or Simple IRA have a new contribution limit of $15,500.
- The contribution limit for participants over age 50 is $19,000 which includes the unchanged $3,500 catch-up limit.
2023 SEP Contribution Limits
- Employees participating in their company or self-sponsored SEP IRA have a new contribution limit of $66,000 (or 25% of the employees compensation, whichever is lesser).
- The annual compensation limit has been increased to $330,000.
2023 IRA and Roth Limits
- Traditional and Roth IRA contribution limits have been increased to $6,500.
- The contribution limit for participants over age 50 is $7,500, which includes the unchanged $1,000 catch-up limit.
Remember, the IRA contribution limit and the 401(k)/403(b) contribution limit are separate. You can contribute to both a 401(k)/403(b) and a traditional or Roth IRA, but it does come with tax deduction limitations.
See this chart for the full breakdown of contribution limits and deduction limits.
How We Can Help
Maximizing the amount you are able to contribute to your retirement plan is an important aspect when planning for retirement. Putting away an additional $1,000 to your 401(k) a year comes down to about $40 per paycheck and will have a huge impact on your account value down the road.
To see just how much of a difference that extra money can make, check out The $300,000 Difference Between Starting to Save at 25, 35, and 45.
Have questions about your financial well-being heading into retirement? Let us put together a free financial plan for you. Contact us with questions.