You Can Save Way More Money in Your 401(k) Next Year

Photo:  Dean Drobot (Shutterstock)
Photo: Dean Drobot (Shutterstock)

Although you can easily drive yourself mad by checking your 401(k) when the economy is in a slump (i.e. right now), there’s some good news from the IRS. And hey, how often have those words been lumped together?

Next year’s contribution limits for 401(k)s and other tax-advantaged retirement plans are being increased to account for inflation. Here’s what to know about the largest cap increase in recent history and what it means for your retirement plan.

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How you can save way more in your 401(k) next year

First off, some context: As Money.com explains, the Treasury Department is legally required to increase the contribution limits according to the rise of living costs. This cap increase falls in line with the recent inflation-adjusted tax rules from the IRS (so learn how to save on your taxes next year, too).

Currently, 401(k) participants are able to contribute as much as $20,500 (which was already a $1,000 increase from 2021). Beginning in 2023, you will be able to contribute $22,500 to your 401(k) plan—a nearly 10% cap increase. Plus, those 50 and older will be able to contribute an addition $7,500 for a maximum contribution of $30,000.

What if I have a different type of retirement plan?

The new $22,500 contribution limit also applies to a some other types of retirement plans, including 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan.

IRAs are also getting a bump. The IRS is increasing the contribution limit for both traditional and Roth IRAs up to $6,500 in 2023. That’s a $500 increase from this year.

As AARP points out, the fact that pensions are increasingly uncommon means that most of us are counting on retirement-specific savings (plus Social Security) to actually retire. So, whatever your retirement plan, these inflation adjustments are necessary.


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