Save More for Retirement in 2023 — the IRS Raises the Limit

Also: Inflation's Impact on the Holiday Season: High Spending, Fewer Gifts
͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ 
October 25, 2022
Retire with Money

Inflation is the gift that keeps on giving this year. First, it was the reason for a huge boost to Social Security benefits in 2023. Now it’s changing how much you can stash for retirement through a 401(k) or an individual retirement account (IRA).

In 2023, people with a workplace retirement plan — 401(k), 403(b), most 457 plans and Thrift Savings Plans — can contribute $22,500. It’s the biggest increase in 401(k) contributions ever, up nearly 10% from this year’s limit of $20,500.

Whenever the IRS raises contribution limits, several other limits are raised as well. Like catchup contributions for people 50 and up: They’ll be able to save an additional $7,500 per year in workplace plans. (That’s $1,000 more than this year’s catchup maximum.)

The IRS is also increasing the contribution limits for individual retirement accounts, or IRAs. For both traditional and Roth IRAs, workers can contribute $6,500 to these accounts in 2023 — $500 more than they could save this year. The one limit that’s not changing is the extra $1,000 people age 50 can put in an IRA. It’s been that amount for more than 10 years.

Read our reporter Sarah Hansen’s story on retirement contributions, and how much the oldest workers can contribute to retirement accounts next year.

— Jill Cornfield, deputy editor

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Timely Retirement News, Insights and Advice

 

The IRS is significantly increasing the thresholds for income tax brackets in 2023 to adjust for the record-breaking inflation the U.S. has experienced lately. And that means if your wages haven't kept up with skyrocketing prices, you may be taxed at a lower rate. The changes apply to 2023 earnings, so they affect the tax returns most Americans will file in the spring of 2024.

 

Series I Savings Bonds, aka I bonds, have been paying out a record-setting interest rate in recent months, but time is running out to lock in that rate. The composite interest rate for the newly fashionable I bonds hit 9.62% in May, an all-time high for the government bond, which was created in 1998 to protect Americans’ savings from inflation.

 

This year, Americans plan to spend about the same amount on holiday shopping as in 2021 — but they expect to buy fewer gifts thanks to inflation. The average household plans to spend $1,455 on holiday purchases, which include experiences, gifts and other retail spending, according to a survey.

 

Good news for savers: Online bank Ally is raising the interest rate on its high-yield savings accounts. The annual percentage yield, or APY, on Ally savings accounts ticked up last week to a record-setting 2.25%, up from the 2.10% rate that was set less than two weeks prior.

 

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Retirement News From Around the Web

 

McCarthy Won’t Rule Out Cuts to Social Security and Medicare if Republicans Win Back Congress
ANCHORAGE DAILY NEWS

 

Why You Might Want to Retire Soon If You Have a Pension
DOLLARS AND DATA

 

55% of Working Americans Feel They Are Behind on Retirement Savings. Here’s How to Catch Up
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Over 50 and Fretting? Tips for Just-in-Time Retirement Planning
PASADENA STAR-NEWS
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