In the United States, workers have various retirement savings plans. The 401(k) is one of the most popular. This plan is sponsored by employers and its main goal is to enable workers to send more money to their retirement savings if they choose.
The 401(k) plan offers certain tax benefits. For example, if you earned $75,000 in 2022 and contribute $5,000 to your 401(k) plan, then your taxable income would have been reduced to $70,000.
Each year, the Internal Revenue Service (IRS) sets the amount that people can contribute to their plans. We explain what the contribution limit is this 2023.
How much can you contribute to your 401(k) retirement account in 2023?
The amount people can contribute to their 401(k) plans has increased from $20,000 to $22,500 for 2023 and from $27,000 to $30,000 for people age 50 and older. This same contribution limit also applies to 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan.
The IRS also shared other changes that apply to retirement plans this 2023.
The limit on annual contributions to an individual retirement account (IRA) has increased to $6,500. The additional IRA contribution limit for people age 50 and older is not subject to an annual cost of living adjustment and remains at $1,000.
The catch-up contribution limit for employees age 50 and older who participate in 401(k), 403(b) plans, most 457 plans, and the government’s Thrift Savings Planhas increased to $7,500.
In addition, the catch-up contribution limit for employees age 50 and older who participate in SIMPLE plans has increased to $3,500 for 2023, from $3,000. The amount people can contribute to their SIMPLE retirement accounts has increased to $15,500.
Meanwhile, the income limit for the Saver’s Credit for low- and moderate-income workers is $73,000 for married couples filing jointly, $54,750 for heads of household and $36,500 for single and married individuals filing separately.