The IRS Announces New Retirement Plan Contribution Limits

You’ve probably noticed that inflation has crept up in the last few years, and more of us are feeling the pinch in our budgets. That goes for retirees, too. And because the IRS recognizes that the cost of living changes throughout the years – for everyone, but especially impacting retirees on fixed incomes – they periodically announce new contribution limits on retirement accounts so that we can save a bit more for the future.

In 2023, the contribution limits to all retirement plans will be raised so that you can save a bit more for your retirement.

For 401k, 403b, most 457 plans, and the federal government’s Thrift Savings Plan, the new annual contribution limit will become $22,500 in 2023. If you’ve reached age 50, you can also make catch-up contributions up to $7,500. So for those of you in the prime years of your career, you could save up to $30,000 in your qualified retirement account next year.

For those of you with an Individual Retirement Account (IRA) the new contribution limit will be raised from $6,000 to $6,500. Unfortunately, catch-up contributions to IRAs are not tied to cost of living adjustments, so that contribution limit will remain the same at $1,000 annually.

Saving more for retirement is always a worthwhile goal. But remember that these contributions are also made on a pre-tax basis, meaning your taxable income will decrease by the amount of your retirement plan contributions. For many of you this could result in a sizable savings on your income tax debt for the year.

If we haven’t adjusted your contributions yet, let’s schedule a meeting. We should discuss your retirement plan and increase your contributions so that your retirement fund reflects your goals for the future.