In light of the high rates of inflation, the U.S. federal government recently announced several cost-of-living adjustments. The IRS restrictions on how much pretax money you can put toward retirement savings in the upcoming year are among these adjustments.
2023 IRS Limits for Retirement Savings Accounts
You should be aware of the following important changes as a result of the IRS announcement:
- Employees who participate in 401(k), 403(b), most 457 plans can now contribute up to $22,500, up from $20,500.
- The annual contribution limit to an IRA has been raised from $6,000 to $6,500.
- The catch-up contribution limit for employees 50 and older who participate in 401(k), 403(b), and most 457 plans has been raised from $6,500 to $7,500. As a result, participants 50 and older in 401(k), 403(b), most 457 plans, can contribute up to $30,000 beginning in 2023.
- Employees will also have a total annual limit of $66,000 in 2023 under the defined contribution plan provision of the IRS, up from $61,000 this year. The code sets limits on contributions to employer-sponsored retirement plans, which may include matching funds that some businesses contribute to workers' retirement savings.
The phase-out ranges for deducting contributions to both traditional and Roth IRAs have also been increased, and can be found on the IRS website.