If there’s one good thing about inflation, it’s that the retirement contribution limits for 2023 are going up! In fact, this is the largest increase we’ve seen in years, if ever.
For 2023, the amount an individual can contribute to a 401(k) increases to $22,500, an increase of $2,000 from 2022. The catch-up contribution amount for those 50+ increases to $7,500, an increase of $1,000 from 2022.
This is a great news for many reasons but here are a few:
- There is a retirement funding crisis in America. To put it mildly, the investing public doesn’t save enough and won’t have the ability to maintain their lifestyle in retirement unless drastic changes are made.
- 401K withdrawals are typically done automatically, so we don’t have to think about it. With auto enrollment being very common, many employees get access without thinking or doing anything.
- The match that many employers give is free money and you should at least contribute enough to get the match.
In the end, remember the idea is to save pre-tax dollars so that you can take those dollars out in retirement when you are probably in a lower tax bracket, so use this opportunity wisely.