The government really wants Americans to save for retirement. As a result, the government sets up rules and incentives to persuade people to save for retirement, most notably through a worker’s employer-sponsored 401(k) or 403(b) qualified retirement plan. While the rules were generally advantageous for savers, there have always been limits on how much one could contribute annually. Recent changes will take effect Jan. 1, 2023, allowing workers to save even more in their qualified plans going forward.
Here is a quick summary:
The employee contribution limit for 401(k) plans is increasing to $22,500 in 2023, up from $20,500, and catch-up deposits for savers 50 and older will still be an additional $6,500. The new amounts also apply to 403(b), most 457, and Thrift Savings Plans.
We should also note that Health Savings Accounts (HSA) owners will also see an increase in how much they can contribute to their accounts. The annual limit for those with self-only coverage is $3,850, an increase of $200 from 2022. For those with family coverage, the 2023 annual limit is $7,750, up $450 from the previous year. The limit on catch-up contributions for people age 55 and older stays at $1,000 over the annual limit.
Lastly, IRA and Roth IRA contribution limits will be increased for 2023 to an annual limit of $6,500 for those under age 50 and $7,500 for those 50 or older.
This should be viewed as good news, especially for super-savers who have maxed out their annual contributions for 2022. If you’re not hitting the annual limit, it’s nothing to worry about; just continue to save as much as you can. If you are one of those super-savers, accept the challenge and try to max out your savings again in 2023.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.