Good news: You’ll be able to save even more for retirement in 2023. The IRS announced Friday that it will increase next year's contribution limits for 401(k)s and other tax-advantaged retirement plans.
The changes are prompted by inflation: Each year, the Treasury Department is legally required to increase the contribution limits as living costs rise. And this year, living costs have certainly soared. Consumer prices were 8.2% higher in September than they were a year earlier.
The IRS increases follow significant changes to the 2023 tax brackets and standard deduction that were also linked to the United States' record-setting inflation. Soaring prices also led to the largest cost-of-living increase in Social Security checks since 1981.
401(k) and IRA contribution limits for 2023
Starting next year, Americans will be able to contribute $22,500 to their 401(k) plans, up from $20,500 this year — a bump of nearly 10%. That limit also applies to a few other types of retirement plans, including 403(b)s, the majority of 457 plans and the federal government’s Thrift Savings Plan.
Workers age 50 and older will be able to contribute an extra $7,500 in “catch-up” contributions, an uptick from the $6,500 they could save this way in 2022. That means older workers can stash a total of $30,000 in their eligible accounts next year.
The IRS is also increasing the contribution limits for individual retirement accounts, or IRAs. For both traditional and Roth IRAs, workers can contribute $6,500 to these accounts in 2023. That's $500 more than they could this year.
One thing that hasn't changed is the limit on IRA "catch-up" contributions made by older Americans. It's still $1,000.