401(k) Retirement Contribution Changes Announced
(RightWing.org) – There hasn’t been much good financial news this year, but the IRS has just given a boost to retirement planning. Increased contribution limits mean Americans can now put more into 401(k)s and other tax-efficient retirement accounts. This could be a good option if you have spare cash to put into savings.
Americans saving for retirement through a 401(k) account will be able to increase their maximum contributions of pretax wages into it by almost 10% in 2023, thanks to a new limit announced Friday by the IRS. It's the largest caps increase in decades. https://t.co/T9Wg9h8C5R
— The New York Times (@nytimes) October 23, 2022
On October 21, the IRS announced the biggest-ever increases to contribution limits on 401(k) and 403(b) plans, most 457s and the federal government’s Thrift Savings Plan. Starting next year, you’ll be able to put up to $22,500 into your plan, a $2,000 increase on the current limit. There’s also an increase in the catch-up contribution, which is available to employees aged 50 and up. That will rise from $6,500 to $7,500, meaning those over 50 can put up to $30,000 a year into their retirement accounts — and employers can also make a matching contribution.
The record-breaking increase in limits is linked to the inflation crisis; increased limits mean people have a chance to boost their retirement funds to cope with future prices. The problem is that high prices now mean many Americans simply can’t afford to put money into retirement planning. According to what Craig Copeland of the Employee Benefits Research Institute told Bloomberg, only around 14% of eligible workers are maxing out their contributions as it is; how many will be able to increase what they save to match the new limits?
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