How to take advantage of higher 401(k) contribution limits in 2023

The SECURE Act 2.0 of 2022 is now law, and it includes dozens of provisions designed to make it easier for workers to save for retirement. Among the changes, the legislation:

Here’s a look at 401(k) contribution limits for 2023 — including the new catch-up amounts — plus tips to maximize your investment.

401(k) plans are a popular way to save for retirement. However, as 401(k)s are tax-advantaged accounts, the IRS limits how much you can contribute each year. The same limits apply whether you have a traditional or Roth plan and vary by age: 

  • If you’re under age 50, the contribution limit is $22,500 for 2023, up from $20,500 in 2022.
  • If you’re 50 or older, you can kick in an extra $7,500 catch-up contribution in 2023 (up from $6,500 in 2022), for a total of $30,000.
  • Starting Jan. 1, 2025, the catch-up contribution will be $10,000 if you’re 60 to 63 years old (the amount will be adjusted for inflation each year).

Of course, the IRS also limits how much your employer can contribute to your 401(k). These limits changed this year as follows:

  • For 2023, you and your employer can contribute up to $66,000 or 100% of your compensation, whichever is less (up from $61,000 in 2022).
  • If you’re 50 or older, the catch-up contribution brings the total to $73,500 (up from $67,500 in 2022).

Here’s a simple breakdown of how much more you and your employer can contribute to your 401(k) this year:

Wondering if your retirement savings are on track? Here are the average 401(k) balances by age, according to recent Fidelity Investments research:

Maxing out your 401(k) contributions is commendable. But the IRS doesn’t like it if you contribute too much, i.e.  — any amount that exceeds contribution limits. Your 401(k) plan should automatically correct an excess contribution (or prevent you from making one in the first place). Otherwise, you’ll have to take steps to fix the mistake:

  • Contact your plan administrator right away. Explain that you made an excess deferral. The plan administrator should return the extra funds — and any income earned on that amount — before the tax filing deadline (generally April 15).
  • Get a new W-2. The returned excess contribution is added to your taxable wages, so you’ll receive a corrected W-2. This can bump up your tax bill or reduce your refund.
  • Report your earnings. Any earnings attributable to the excess contribution is taxable income. You’ll receive Form 1099-R for the tax year the plan distributes the excess contribution to you.

If you don’t correct the excess deferral by Tax Day, the excess will be taxed twice: the year you made the contribution and the year you received it as a distribution (unless it was a designated Roth contribution). It takes time for plan administrators to process corrective distributions, so start the process as early as possible — ideally well before April 15.

Trying to decide if you should invest in an IRA vs. 401(k)? Good news: You can contribute to both a 401(k) and an IRA, up to the annual limits for each — and doing so can be an excellent idea. Maxing out the contributions (and taking advantage of any employer matches) can help you grow your nest egg faster and better prepare for retirement.

Still, be aware that traditional IRA contributions may not be deductible if you or your spouse are covered by a plan at work, depending on your filing status and modified adjusted gross income (MAGI). For example, say you’re married, file jointly, and have a 401(k) at work. For 2023, you could claim:

  • The full deduction if your MAGI is $116,000 or less.
  • A reduced amount if your MAGI is between $116,00 and $136,000.
  • No deduction if your MAGI is $136,000 or more.

 (Visit for a complete list of IRA deduction limits based on filing status and MAGI.)

Individual retirement accounts (IRAs) are another popular way to build a nest egg, but the contribution limits are significantly lower than those of 401(k) plans. The most you can contribute to your Roth and traditional IRAs in 2023 is:

  • $6,500 if you’re younger than age 50 (up from $6,000 in 2022)
  • $7,500 if you’re age 50 or older (up from $7,000 in 2022)

You can contribute to a traditional IRA no matter how much you earn. However, you may not be able to contribute the full amount — or anything at all — to a Roth IRA if you make too much. The limits are based on your filing status and MAGI:

A 401(k) can be an excellent way to save for retirement. To get the most out of your plan:

  • Start contributing as early as possible. The sooner you invest, the longer your investment can grow and benefit from the power of compounding.
  • Take full advantage of your employer match. Contribute enough to your 401(k) to receive the full match your employer offers. Every dollar your employer contributes is free money (and one less dollar you have to stash for retirement).
  • Increase your contribution percentage. Many retirement experts recommend stashing 10% to 20% of your income in your 401(k) each year. If you can swing it financially, increase your contribution rate by 1% each year (or whenever you get a raise) until you reach your savings goal.
  • Stay until you’re vested. You may need to be fully vested in your 401(k) plan to keep the match from your employer (some employers let you keep a portion of the match before you’re fully vested, while others make you forfeit the entire amount). If a significant amount of money is at stake, you may want to consider postponing your departure.
  • Minimize fees. Investments with high fees can significantly erode your 401(k) balance over time. Aim for the lowest-cost investments that still match your risk tolerance.
  • Maximize tax breaks. Low- and mid-income workers can claim the saver’s tax credit, worth up to $1,000 ($2,000 for married couples filing jointly) in 2023. As a tax credit (and not a tax deduction), the saver’s credit reduces your tax bill dollar-for-dollar.
  • Keep track of your 401(k)s. It can be surprisingly easy to forget about a 401(k) you had with a previous employer. Keep track of your accounts and consider rolling old plans into your next job’s retirement plan or an IRA.  
  • Remember your RMDs. Under SECURE 2.0, the starting age for required minimum distributions increased from 72 to 73 starting Jan. 1, 2023. If you turn 72 this year, you can choose to wait an extra year before taking money out of your retirement accounts.

Retirement accounts, of course, are just one part of your full financial picture. As you take a look at your 401(k) and IRA contributions for 2023, it’s a great time to review your other investments and savings accounts to ensure you’re making the most of your money.

Everyone’s financial situation is different. Consult your financial advisor or tax professional to see how SECURE 2.0 changes apply to you. 

Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.

This article was originally published on and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at