Rising inflation and interest rates have spurred the IRS to make record increases in retirement plan contribution and compensation limits for 2023.
These changes are outlined in IRS Notice 2022-55, but here are some of the highlights:
- Elective annual deferral limits for most employer-sponsored retirement plans will rise from $20,500 to $22,500, the largest increase in decades.
- Annual catch-up contributions for 401(k), 403(b) and similar defined contribution plans will rise from $6,500 to $7,500.
- The annual aggregate contribution limit (the combined total of both employee contributions and employer matching and profit-sharing contributions) for defined contribution plans is increasing from $61,000 to $66,000.
- Annual contribution limits for Traditional and Roth IRAs will rise from $6,000 to $6,500. Catch-up contributions, currently $1,000 per year, are not increasing.
The table below summarizes the key changes for 2023.
1 Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit.
2 Contributors must be age 50 or older during the calendar year.
3 All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit.
This material has been provided for general informational purposes only and does not constitute either tax, legal or investment advice. Retirement savers should consult a tax preparer, attorney or financial advisor to discuss their specific situation.
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Michael Flaherty is a financial advisor located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or mflaherty@canbyfinancial.com
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