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Retirement Plan Contribution Limits Increase for 2023

Retirement Plan Contribution Limits Increase for 2023

November 08, 2022

How much should you save for retirement from each paycheck? That’s one of the most common questions in the financial planning world. We generally recommend that our clients save as much as possible, for several very important reasons. And starting in 2023, the ceiling on those possibilities has been raised a bit more.

The IRS regularly reviews cost of living data, along with information on retirement, and they release new annual contribution limits for qualified retirement plans. Raising the limits allows us to potentially save a bit more for retirement, enjoy important tax benefits, and better prepare for the future as inflation drives up the cost of living.

In 2023, the new contribution limits will allow you to save a maximum of $22,500 in your 401k, 403b, Thrift Savings Plan, and most 457 plans. In addition, those of you who have reached the age of 50 can make an additional “catch-up” contribution of $7,500. That means those of you in the last decade or so of your careers can contribute up to $30,000 to your retirement plan next year!

For those of you utilizing an Individual Retirement Account (IRA), the contribution limit has been raised to $6,500 for next year. You can also make an additional “catch-up” contribution of $1,000 if you’re aged 50 or older (these contributions are not adjusted for cost of living, so will remain at $1,000 indefinitely).

Not only can you better prepare for your future by adjusting your contributions upward; you will reap important tax benefits as well. Contributions to the above types of retirement accounts are made on a pre-tax basis, meaning you can effectively lower your overall taxable income by the amount contributed.

For more information on maximizing your retirement plan contributions, or for other information on retirement planning, give us a call. We should sit down to discuss your plans for the future, and help you make a plan to achieve those goals.