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Boost your retirement savings in 2023: 401(k) and IRA contribution limits are up nearly 10%
Saving for your retirement

Boost your retirement savings in 2023: 401(k) and IRA contribution limits are up nearly 10%

Nicolle Willson, J.D., CFP®, C(k)P®

The start of a new year can be a great time to reprioritize your financial goals. For some that might mean paying down a high credit card balance. Others may find themselves saving for a big trip or a new home. But no matter what your goals look like, it’s never too early or too late to start saving for retirement. And in 2023, you'll be able to contribute more than ever before to your retirement savings.

This year, the maximum amount you can contribute to your retirement savings increased by nearly 10 percent. The IRS caps how much you can add to your retirement accounts each year, and limits vary based on the type of account. This year’s changes are largely driven by inflation and the rising cost of living. Inflation is at a 40-year high, and the 7% to 11% increases for most 2023 contribution limits is the largest inflation adjustment since 2007.

Let’s take a look at some of the changes happening to 401(k)s and IRAs in 2023, and what they might mean for you.

401k plans

If you’re contributing to a 401(k):

This year the annual contribution limit for a 401(k) will increase from $20,500 to $22,500. This is also true for 403(b)s, most 457 plans, and Thrift Savings Plans.

Other changes affecting 401(k) plans next year include:

Catch-up contributions

Catch-up contributions will increase from $6,500 to $7,500 in 2023. These give people aged 50 or older an opportunity to make extra contributions, in addition to the annual deferral limit for 401(k) accounts, 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.


The annual limit on compensation refers to the cap the IRS puts on how much of an employee’s compensation can be matched by their employer’s 401(k). That limit is increasing from $305,000 to $330,000 in 2023.

Compensation includes all income an employee receives during a calendar year. It can consist of wages and salaries, commissions and tips, bonuses, fringe benefits like using a company car, tuition assistance, and fees for professional services, such as hiring an attorney. (Note — the definition of compensation will depend on your personal 401(k) plan document.)

Highly compensated employee

In 2023, the highly compensated employee (HCE) compensation threshold will increase to $150,000. Why is this important? The IRS wants to ensure that 401(k) plans benefit all employees, not just owners or employees who earn a lot. As a result, highly compensated employees’ contributions are limited every year. Generally, an HCE’s total retirement contributions can’t be more than 2% of the total contributions of non-HCEs. You can learn more about the criteria for a highly compensated employee here.

Key employee

The new compensation threshold for a key employee in 2023 is an individual earning over $215,000. A key employee is:

  • A business owner or employee who earned $215,000 or more during 2023
  • A business owner who owns more than 5% of the company; or
  • An owner who earns more than $150,000, and who also owns more than 1% of the company.

Saver’s tax credit

As a way to encourage low and middle-income Americans to save for retirement, the IRS provides a tax credit, known as a saver’s tax credit, to lower their tax bills. Here’s how it works: by contributing to your 401(k), IRA, or another qualifying retirement plan, savers may be eligible for a credit of up to $2,000.

In 2023, the upper-income limit for determining whether specific individuals are eligible for the saver’s tax credit will increase from $68,000 to $73,000 for married filing jointly. For head-of-household filers, the rate will increase from $51,000 to $54,750, and from $34,000 to $36,500 for all other taxpayers.

If you’re contributing to an IRA:

Those saving for retirement with an IRA will have the opportunity to save more this year. IRA contributions will increase to $6,500 in 2023, up from $6,000 in 2022. Catch-up contributions for individuals 50 and older will remain at $1,000, the same rate from 2022.

An employer’s contribution to an employee’s SEP-IRA, a simplified employee pension plan, can’t be more than 25% of the employee’s compensation, or $66,000 for 2023 (up from $61,000 in 2022), whichever is less.

In 2023, there will also be an increase in total annual contributions, or the total of all employer and employee contributions made in a calendar year to 401(k) and other plans. In 2023, savers can max out at $66,000, a $5,000 increase from last year. For example, if you have a SEP IRA for self-employed income, and you contribute to your employer’s 401(k) plan, the total amount you can contribute across all accounts is $66,000.

Affordable 401(k) plans

Here’s an overview of the 2023 contribution limits compared to last year’s:

Contribution limits 2022 limit 2023 limit
401(k) 403(b)s, most 457 plans, and Thrift Savings Plans $20,500 $22,500
Total annual contributions (all sources) $61,000 $66,000
Employee catch-up contributions  $6,500 $7,500
Annual limit on compensation $305,000 $330,000
Highly compensated employee $135,000 $150,000
Key employee $200,000 $215,000
Saver’s tax credit $68,000 for married filing jointly; $51,000 the head of household; $34,000 for all other taxpayers $73,000 for married filing jointly; $54,750 for the head of household; 36,500 for all other taxpayers
IRA contributions $6,000 $6,500
SEP-IRA contributions $61,000 $66,000

At Guideline, it’s our mission to help everyone arrive at secure retirement, and we believe that the first step on that journey is education. If you found this article helpful, here are a few more resources to check out:

  • Wondering how much you should contribute to your 401(k)? Get a crash course here.
  • Thinking about starting a SEP IRA this year? Here’s our guide on how to get started and everything you need to know.
  • Check out our comprehensive guide to understanding the differences between traditional and Roth 401(k) accounts and considerations to keep in mind when creating your retirement savings strategy.
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The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances.  You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.