Higher 401(k) Limits in 2023

[canyonwalker]

The contribution limit for 401(k) accounts is increasing for 2023. The government has upped the individual contribution limit a whopping $2,000, from $20,500 to $22,500. The catch-up contribution limit for employees 50+ rises $1k to $7,500. That means for me, as a 50+ person, I get to jam an additional $3k in my account next year.



Yes, I'm maxing out my 401(k) contributions. Yes, I'm fortunate to be able to do that. Not everybody earns enough to save that much. Though frankly it's not just about how much you earn; there's also a choice one makes about how much to save. My partner and I made a choice years ago when our salaries reached a certain point well beyond our current expenses that we would not increase our expenses (say, by buying a larger, expensive house, as so many of our friends did) just because "we could afford it" but instead would save aggressively to afford ourselves a comfortable retirement.

Comments

[some_other_dave]

During my last NASA job, I technically was employed by the UC system. Let me tell you, state employees get retirement plan options out the wazzoo!

First, there's the 403(b). It's basically a 401(k) for non-profit entities, same contribution limits and similar distribution options and investment types.

You also get a 457 plan, which is a lot like a 401(k) but a bit better. Same contribution limits, but you can take distribution at any time without extra penalty. You just have to pay taxes at your current rate when you withdraw them.

There's the "defined benefit plan", which is basically a traditional pension. Sadly, I did not work for them long enough to vest this.

Finally, there's the "defined contribution plan", which is where the state says "thou shalt contribute X percent" and it goes into another retirement account. I'm much more fuzzy on the details of this one.

But with double the contribution limits, plus a real live pension, you could really sock money away tax-deferred!! I really tried to see if I could survive on my take-home after maxing out both voluntary contributions, but that really did not leave enough so I was unable to do so.

[canyonwalker]

Cool story. It lines up with a topic or two I'm planning to write about next in this area, whether to max out your retirement savings plans and what the advantage of doing so is.