Good news for those who want to pump more money into their retirement savings: The IRS just raised the contribution limit on 401(k) plans for 2023, as well as for similar tax-deferred plans for public education workers, federal and state employees, and those who work for tax-exempt groups. That new cap, per the agency's Friday announcement, is $22,500, a $2,000 hike from the current federal contribution—or a record 9.8% increase, reports CNN Business. Bloomberg notes it's the biggest jump since the cap began to be indexed to inflation in 2007, which is when the limit was $15,500.
There's also been a boost in how much "catch-up" contributors (those 50 years of age and over) can make to ensure they have the money they need for their retirement looming on the horizon. That number has now been set at $7,500 for 2023, up from $6,500, meaning individuals 50 and up will be able to sock away up to $30,000 next year in eligible accounts. These limits don't include matching contributions from employers. Those who hold IRAs (both the traditional and Roth versions) will also see an increase in what they can contribute: $6,500, from the current $6,000, though there's no corresponding bump for the catch-up contribution.
MarketWatch notes other IRS changes meant to help Americans deal with inflation, including an increased standard deduction and raised income-tax brackets. But while this will prove good news for those who are feeling their pocketbooks pinched lately, it comes with a caveat. "It's just not enough good news," at least not in the moment, tax attorney Adam Brewer tells the financial outlet. "Anyone who saves money on this, you'll get a bigger refund in 2024," he says. But "you can't put a tax refund in February 2024 into the gas tank" now. (More 401(k) plans stories.)
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