Although there hasn’t been much good financial news this year, the IRS just gave retirement planning a boost. Americans can now contribute more to 401(k)s and other tax-efficient retirement accounts because of increased contribution limits. If you have extra money to set aside for savings, this can be a wise choice.
The IRS announced the largest-ever increases to contribution limits for 401(k) and 403(b) plans, the majority of 457s, and the Thrift Savings Plan of the federal government on October 21. You will be able to contribute up to $22,500 into your plan at the beginning of the next year, which is a $2,000 increase over the present cap. The catch-up contribution, which is accessible to employees 50 years of age and older, has also increased. As a result, persons over 50 can contribute up to $30,000 per year to their retirement accounts, and employers may also make a matching contribution. This will increase from $6,500 to $7,500.
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
The inflation issue is responsible for the record-breaking increase in limitations, which gives people the opportunity to raise their retirement savings in order to keep up with rising prices. The issue is that because of current high prices, many Americans simply cannot afford to invest in retirement planning. According to Bloomberg, only around 14% of eligible workers are currently maxing out their contributions, according to Craig Copeland of the Employee Benefits Research Institute.
