IRS Increases 401(k) Limit by Record Amount as Inflation Surges
The Internal Revenue Service is boosting how much Americans can plow into their 401(k) plans next year by a record amount amid a surge in inflation.
The contribution limits for the popular tax-deferred retirement savings accounts will rise by $2,000 to a maximum of $22,500 in 2023, reflecting the change in the headline consumer price index, the IRS said Friday. It’s the biggest dollar increase since the cutoff began being indexed to inflation in 2007, when the maximum amount allowed was $15,500.
The changes mean that retirement savers who are 50 or older can now save a combined $30,000 a year in their 401(k)s, between the new limit and the increase to $7,500 for catch-up contributions.
Those who sock away the maximum are in the minority — only about 14% of 401(k) savers reached the limit in 2021, said Craig Copeland, director of wealth benefits research for the Employee Benefits Research Institute.