IRS 401(k) contribution change: Limits to increase in 2023 due to inflation
The Internal Revenue Service announced a record increase in allowable contributions to 401(k) and other tax-deferred retirement plans.
Starting in 2023, you will be allowed to contribute up to $22,500 into your 401(k), 403 (b) and most 457 plans or Thrift Savings plans. According to CNN, that’s $2,000 – roughly 9.8% - more than the current $20,500 federal contribution limit, a change due largely to inflation.
Also, the limit on annual contributions to an IRA increased to $6,500, up from $6,000, a boost of about 8%.
The IRS catch-up contribution limit for individuals aged 50 and over is not subject to an annual COLA and remains $1,000. However, the catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increasing to $7,500, up from $6,500. That change means participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older, can contribute up to $30,000 starting in 2023.
The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.
Income ranges for determining eligibility to make deductible contributions to traditional IRAs and to contribute to Roth IRAs and to claim the Saver’s Credit all increased in 2023. You can go here to see the changes.
The changes come just after the IRS released a list of inflation-related adjustments, including upping the standard deduction claimed by taxpayers.