IRS unveils record contribution levels for 401(k) plans to meet inflation
The IRS on Friday raised contribution limits for tax-advantaged retirement accounts to adjust for soaring inflation.
In 2023, individuals will be able to contribute $22,500 to their 401(k), 403(b) and related retirement accounts, up from $20,500 this year. Those who are 50 and older can give $30,000, a year-over-year increase of $7,500.
The IRS also increased the contribution limit for individual retirement accounts (IRAs) and Roth IRAs. Individuals will be able to put $6,500 toward those accounts next year, an increase of $500.
To contribute to a Roth IRA, an individuals’ adjusted gross income must be below $153,000, up from $144,000 this year. The income limit for joint filers rose from $214,000 to $228,000.
The cost-of-living adjustment for retirement accounts comes after consumer prices rose 8.2 percent over the last year ending in September, driven by higher costs for food and rent.
The IRS this week also announced a larger standard deduction and more generous tax brackets for the 2023 tax year.
Social Security payments rose 8.7 percent to account for rising prices, the Social Security Administration announced last week. Red-hot inflation and a looming economic slowdown pose a unique challenge for older Americans.
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