One benefit of inflation is the IRS’ increased retirement plan contribution limits, which have risen for 2023 along with the consumer price index (CPI).
The 2023 contribution limits are:
We strongly recommend contributing the full amount available to you into your retirement account(s) – as close to the limits as possible, if you can’t absolutely max out.
Further, we would advise checking into all retirement options available through your employer – public schools, colleges, universities, churches, hospitals, and other tax-exempt organizations may offer more than one option, including 401(k), 403(b), and/or 457 plans, and may also allow you to participate in and contribute to more than one employer-sponsored plan – e.g., offering you both a 401(k) and a 403(b) plan.
If you have both a 401(k) and 403(b) plan account, be aware that the total annual contribution to these employer-sponsored retirement plans is $22,500 for 2023 – or $30,000 if you are over 50. However, it may be useful to have more than one employer-sponsored plan account, especially if one or more of the plans does not allow catch-up contributions. In such a case, you can contribute the amount of your catch-up to the second retirement plan account – the IRS permits you to treat this additional contribution as a catch-up for their purposes, even if your plan does not.
However, if your employer offers you both a 401(k) plan and a 457 plan, a deferred compensation plan, you can contribute $22,500 to each plan in 2023, not counting catch-up contributions. If you have this option available, and are over 50, you can contribute up to $30,000 tax-deferred to each account for 2023 – $22,500 plus $7,500 in catch-up. This would mean that, for those over 50, a total tax-deferred contribution of $60,000 can be made for 2023.
If you have any questions on leveraging these new contribution limits to maximize your retirement assets, reduce your tax liabilities, and plan for a secure and happy retirement, our CPAs/financial planners are always here for you.
Please click here to email us directly – let us know how we can help.
Until next time –
Peace,
Eric