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Understanding the New IRA and 401(k) Contribution Limits for 2023

As we embark on 2023, it's crucial to stay informed about the latest changes in retirement savings options. This year, we're seeing significant updates to the contribution limits for both 401(k) plans and Individual Retirement Accounts (IRAs), which offer excellent opportunities to enhance your retirement savings.

401(k) Plans: Maximizing Your Retirement Savings

The contribution limit for 401(k) plans has been increased to $22,500, a notable rise from last year's cap of $20,500. This change is applicable to 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan. For those of you who are 50 years or older, the news is even more encouraging. The catch-up contribution limit has also increased to $7,500, allowing a total contribution of up to $30,000 in 2023. These enhanced limits provide a significant opportunity to bolster your retirement savings, particularly if you're nearing retirement.

IRAs: A Boost for Your Individual Savings

Similarly, the IRA contribution limits have been adjusted upwards. For individuals under 50, the new limit is $6,500, up from $6,000. For those 50 and older, the limit is now $7,500. These increases apply to both traditional and Roth IRAs, offering more flexibility and potential tax advantages in your retirement planning.

Don't Miss the Deadline

It's important to remember that the deadline for making IRA contributions for a given tax year is typically April 15 of the following year. For 401(k) plans, contributions must be made by December 31. We recommend planning your contributions well in advance to fully leverage these increased limits. Please contact us if you have any questions.