Why 2023 Will Be A Banner Year For Retirement Savers

Rarely have we reported good news about savings and investing, especially in 2022. Stocks and bonds will continue to be volatile as long as the economy is slowing and/or the Fed continues to jack up interest rates.

But here’s a guaranteed bit of good news. You’ll be able to sock away more money in your 401(k) and Individual Retirement Accounts (IRA) in 2023. It’s a good news/bad news scenario, though: The IRS is raising savings limits due to consumer inflation, which was running around 7% annually as I write this.

Nevertheless, being able to save more is generally a plus for retirement savers. You can put more tax-deferred money to work and you get a tax break for contributing to 401(k)-type plans, which include 403(b)s and 457s. Here’s the glad tidings:

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $22,500.
• The limit on annual contributions to an IRA will increase to $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
• The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $7,500.
• The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500, up from $3,000.

As always, contribute as much as you can, invest in low-cost index funds that cover all stock and bond markets and build up your emergency fund outside of your retirement savings. If you make any resolutions for 2023, these are pretty solid going forward. And always take advantage of all employer contribution matches. It’s free money, but you have to invest up to the match to reap the bonus dollars.

As Willie Nelson (pictured above) once sang, you’ll be “on the road again” to a dignified retirement if you boost your savings strategy with increased contributions. It’s crazy not to save as much as you can.

By John F. Wasik, Contributor