IRS increases amount you can save for retirement in 2023 due to inflation

Yahoo Finance's Dave Briggs explains the increased 401(k) contribution limits for next year.

Video Transcript

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DAVE BRIGGS: All right, high inflation means there are big updates to retirement savings plan contributions. The IRS announcing a record increase in contribution limits to certain retirement plans. Here are the numbers you need to know.

Starting next year, you'll be allowed to contribute up to $22,500 into your 401(k), 403(b), most 457 plans or the Thrift Savings Plan for federal employees. That's $2,000 more than the current limit of $2,500. For participants who are 50 or older, the catch up contribution for 401(k)s and other workplace plans will increase by $1,000 to $7,500. That means if you're over 50, you can contribute as much as $30,000 to your 401(k) next year.

Let's move to individual retirement accounts or IRAs. IRA contributions will raise, increase, $6,500 for 2023, a $500 increase. However, the catch-up contribution limit stays unchanged at $1,000. In addition, the IRS announced updates to contributions to individual 401(k)s and income limits for Roth IRAs. All this just one more way inflation is impacting your wallet.