Employers take note! Higher costs of living also mean higher annual retirement plan limits.

To combat inflation, the IRS increased the $ amount individuals can contribute to their 401(k) in 2023 to $22,500, up from $20,500 for 2022. The IRS also issued guidance in its Notice 2022-55 (N-2022-55) regarding all cost‑of‑living adjustments affecting $ limitations for pension plans, IRAs, and other retirement-related items for tax year 2023.

Highlights of 2023 changes:

  • The annual salary contribution limit for employees in 401(k), 403(b), and most 457 plans increased to $22,500, up from $20,500. The limit for SIMPLE plan participant contributions similarly increased to $15,500, up from $14,000.
  • The annual catch-up salary contribution limit for employees aged 50+ in 401(k), 403(b), and most 457 plans increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), and most 457 plans who are 50+ can contribute up to $30,000 for 2023. 
  • The catch-up contribution limit for employees aged 50+ in SIMPLE plans also increased to $3,500, up from $3,000.