The Internal Revenue Service will allow Americans to contribute more money to their retirement plan in 2023 than ever before. The IRS shared details on the maximum annual contribution for next year on Friday, revealing an increased limit compared to previous years.
Considering the challenging economy that has led to heightened inflation and soaring prices, IRS will allow workers who have 401(k) plans to contribute up to $22,500 in 2023. This represents almost a 10 percent increase compared to last year’s limit of $20,500. Besides 401(k), the new limit will also apply to 403(b), 457 plans, and Thrift Savings Plan.
Friday’s release also revealed an increase in additional contributions by those 50 or older. In 2022, these workers could put in an additional $6,500 for catch-up purposes. Next year, they will be able to add $1,000 more, for a total of $7,500.
According to Allianz Life’s Kelly LaVigne, this increase could serve well for people who managed to land better-paying jobs recently or had a pay rise at their current job. It will also help Americans to have their retirement up to date with economic conditions.
“For people who have had an increase in pay recently — either by switching jobs, getting a promotion or a bonus — this could be a good opportunity to put more of that income away for their future retirement,” explained LaVigne.