The IRS released their revised 2023 Contribution Limits for Retirement Plans, which is important for every individual saver or retirement plan sponsor. The contribution limits are subject to adjust for inflation annually, but they don't always increase if inflation is mute. However, given the recent high inflation rates, the retirement account contribution limits jumped considerably for 2023.
IRA Contribution Limits for 2023
For anyone saving for retirement with a traditional or Roth IRA, the 2023 limit on annual contributions to their account goes up $500 – from $6,000 this year to $6,500 next year. That's an increase of 8.33%. The limit was stuck at $6,000 since 2019, but the steep inflation we've experienced lately finally gave it a boost. The IRA "catch-up" contribution for savers over age 50 is not subject to an annual cost-of-living adjustment and stays at $1,000 for 2023 (for a total 2023 contribution limit of $7,500 if you're at least 50 years old).
2023 Contribution Limits for 401(k) and Other Employer-Sponsored Plans
Employees who are saving for retirement with a 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan (TSP) can contribute up to $22,500 to those plans in 2023. That's a $2,000 increase over the contribution limits in place last year. The "catch-up" contribution limit for employees age 50+ also rises from $6,500 to $7,500 for 2023 – for a total limit of $30,000. So, for employees who are at least 50 years old, you can contribute over 11% more to your employer-sponsored retirement plan in 2023 than you can in 2022.
The contribution limit for a SIMPLE IRA, which is a retirement plan designed for small businesses, is also increased for 2023. It jumps from $14,000 to $15,500 next year. The catch-up contribution limit for workers age 50+ who participate in a SIMPLE plan is also increased for 2023 – from $3,000 to $3,500.
Sandbox Financial Partners created this 2023 Contribution Limits for Retirement Plans chart for educational and informational purposes only. It is not intended as ERISA, tax, legal or investment advice. For a deeper conversation on these issues, please contact Sandbox Financial Partners directly at 301.214.4190 or info@SandboxFP.com or click on the link below.