IRS raises limits for retirement savings accounts for 2023 taxes
The amount of pretax money you can contribute to your retirement is increasing next year.
The amount of pretax money you can contribute to your retirement is increasing next year.
Individual employees will be able to contribute up to $22,500 to their 401(k) retirement plans for the 2023 tax year, up from $20,500 in 2022, the IRS announced Friday.
Under the IRS' defined contribution plan provision, employees will also have a total annual limit of $66,000 in 2023, up from $61,000 this year. The provision governs limits to retirement plan contributions made through employer-sponsored programs, which can include matching-dollar amounts that some companies make toward employees' retirement savings.
The changes are part of a group of cost-of-living adjustments, or COLAs, the federal government has announced amid the highest inflation rates in four decades. The announcements include the largest COLA adjustment for Social Security since 1981 and a 7% shift upward in the income tax brackets that determine how much money the federal government gets out of your paycheck.
About 60 million people in the U.S. are active participants in 401(k) plans, according to the Investment Company Institute, an association of regulated investment funds. Data released last month by the Bureau of Labor Statistics shows that 52% of all private industry workers participate in their employers' defined contribution retirement plans.
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