Recently, the IRS announced historic increases in the annual contribution limits for 401(k) and other qualified retirement plans. These are the largest inflation adjustments since contribution levels were first indexed to inflation in 2007.
Contribution limits for 401(k) plans, 403(b) plans, TSPs and most 457 plans will increase from $20,500 to $22,500, with the catch-up provision for participants aged 50 or over increasing from $6,500 to $7,500. Participants aged 50 or over can therefore make a total employee contribution of $30,000 in 2023, representing an unprecedented increase of just over 11%, while the increase for those under 50 is an equally unprecedented 9.8%. If you have multiple 401(k) and/or 403(b) plans, please keep in mind that these limits are the total amount that you can contribute across all your accounts.
The limit on total (employer plus employee) contributions to defined contribution plans increases by $5,000 to $66,000, up from $61,000 in 2022.
Maximum contributions to traditional and Roth IRAs will also increase, from $6,000 to $6,500, with the IRA “catch-up” provision (which is not indexed to inflation) remaining unchanged at $1,000. Eligibility to contribute to a Roth IRA in 2023 is limited to taxpayers with a modified AGI below $153,000 for single filers (up from $144,000), or $228,000 for married taxpayers filing jointly (up from $214,000). To be eligible to deduct contributions to a traditional IRA, modified AGI must be below $83,000 for single filers (up from $78,000), or $136,000 for those married taxpayers filing jointly (up from $129,000).
The amount that an individual can contribute to a SIMPLE account increases to $15,500 (up from $14,000 in 2022), while the catch-up contribution limit for SIMPLE accounts increases to $3,500 (up from $3,000).
