Retirement savers will be able to stash away significantly more money in their 401(k)s and IRAs next year, the IRS announced Friday.
Because of the soaring cost of living, the inflation-adjusted employee contribution limit for 401(k)s will be $22,500 for 2023. That’s an unprecedented increase of $2,000 from this year. Those with traditional or Roth IRAs can contribute up to $6,500, up from $6,000 this year.
The news comes a few days after the IRS announced the new tax brackets and standard deduction for 2023. Those also climbed about 7%, meaning workers should see bigger paychecks in the new year, if their salary and withholdings stay the same. Social Security beneficiaries will receive significantly larger checks next year as well, owing to inflation.
Individuals over the age of 50 will be able to contribute an additional $7,500 to their 401(k)s and similar accounts—such as 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan—a $1,000 increase from this year. That means older workers can put away $30,000 into their work-sponsored account next year. And that’s before your employer’s matching contribution.
They are also allowed to contribute an additional $1,000 to IRAs (that amount isn’t adjusted for inflation).
The income phaseouts for certain deductions are also increasing, as is the income threshold that determines whether taxpayers can contribute to a Roth IRA.
For the latter, the income phaseout range for individuals making contributions to a Roth IRA will be between $138,000 and $153,000—up from between $129,000 and $144,000. For married couples filing jointly the phaseout range will be between $218,000 and $228,000, up from between $204,000 and $214,000.
Additionally, the amount individuals can contribute to a SIMPLE retirement account—which is a retirement account used by small businesses—in 2023 is $15,500, up from $14,000 this year.
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