IRS Increases Contribution Limits for 2023

By Duke Griffith, Supervising Senior
[email protected]

On Friday October 21, 2022, the Internal Revenue Service (IRS) announced a record increase on the contribution limits for retirements plans for 2023. This largest ever increase on contribution limits is due to rising inflation rates in the United States. Inflation is up approximately 8.2% for the 12-month period ended September 2022.

Employee Benefit Plans

Beginning in 2023, participants will be able to contribute $22,500 (9.8% increase on 2022 limits
of $20,500) into their 401(k), 403(b) and other tax-deferred retirement plans.

The IRS also increased catch-up contributions for participants aged 50 and over. These contributions were raised from $6,500 in 2022 to $7,500 in 2023. For participants 50 and over will now be able to contribute up to $31,000 starting in 2023.

Individual Retirement Accounts

Individuals who contribute to individual retirement accounts (IRAs) also saw an increase in contributions limits. Starting in 2023, the IRS announced an increase from $6,000 to $6,500. This is the first increase in IRA contribution limits since 2019. Catch-up contributions for IRAs will remain at $1,000.

Future Changes

In March 2022, the House passed the Secure Act 2.0. Included in this bill was a provision to increase catch-up contributions limits to $10,000 for participants ages 62, 63 and 64. Also included in the bill is a provision that would require employers to automatically enroll all eligible
workers into their retirement plans at a savings rate of 3% of salary. Enrolled participants contribution rates will be automatically increased each year by 1% until their contribution reaches 10% annually.

Though the bill has passed the House it has not yet passed in the Senate and many changes to the bill are expected before it is passed. Please contact your Louis Plung advisor with any questions or email [email protected].