We can all agree that inflation stinks, right? But here’s one handy side effect, and it’s good news if you’re trying to save money for retirement.
Because of runaway inflation, the IRS is ratcheting up 401(k) Contribution limits faster than they ever have before. Next year, Americans will be allowed to funnel significantly more of our paychecks into 401(k) and similar retirement plans.
Yes, it’s true that only about 14% of us actually max out our 401(k) plans each year. But this is big news for those of us who do. Also, if you’re not maxing out your plan, you might want to start thinking about it.
What Are the New Limits for Retirement Accounts?
Here are the deets: In 2023, the maximum amount you’ll be able to contribute to a 401(k), 403(b) and most 457 plans during the year will rise to $22,500, the IRS announced.
That’s a noticeable jump up from $20,500 this year. In fact, it’s up by a record 9.8%. The IRS has never gone that big before.
Oh, and if you’ve got an individual retirement account, aka an IRA? Thanks to inflation, the limit on your annual contributions to your IRA will jump from $6,000 this year to $6,500 next year.
The catch-up contribution limit for IRAs isn’t changing. Those 50 and older can save another $1,000 per year on top of their contribution limit.
You can make these catch-up contributions up until the filing deadline for that year’s taxes. So even after New Year’s 2022 has passed, you can still put money in your retirement accounts up until you file your taxes in April 2023.
So start socking that money away, if you can.
How Many of Us Are Maxing Out Our Retirement Plans?
Let’s get real, though. Most of us aren’t able to stash away that much money for retirement. It’d be nice, but we just can’t afford…