Making the maximum contributions to your retirement plan can increase your savings for retirement and lower your taxes. But the end of the year is fast approaching, and with it, the 2023 401(k) contribution deadline.
So, here is some information to help you take advantage of tax breaks associated with your retirement savings plan — including the 2023 401(k) contribution limits (and new 401(k) contribution limits for 2024.)
What is the last day to contribute to a 401(k) for 2023?
The deadline to contribute to an employer-sponsored 401(k) plan for 2023 is Dec. 31.
Can I contribute to a 401(k) after December 31? A common question is whether you can contribute to your retirement savings plan after Dec. 31. The answer is that because 401(k) contributions are made through payroll deductions, Dec. 31 is the deadline.
However, if you have an IRA, you can contribute to that account up until the 2023 tax year filing deadline, which is April 15, 2024. The IRA contribution limit is $6,500 and the $1,000 catch-up contribution — if you are 50 or older — takes the total maximum contribution to $7,500.
401(k) contribution limits 2023
- The 401(k) contribution limit for 2023 is $22,500. If you are 50 and older, you can contribute an additional $7,500 catch-up contribution.
- In that case, your total max 401(k) contribution for the 2023 tax year would be $30,000.
The 401(k) contribution deadlines and limits also apply to Roth 401(k) and 403(b) retirement plans. The 2023 contribution limits for 457 plans are similar, but there is a separate catch-up contribution limit of $7,500 if you’re nearing retirement age.
FAQs
How much can an employer contribute to a solo 401(k)?
If you contribute to your solo 401(k) as an employee, you can contribute up to $22,500 for 2023. The total solo 401(k) contribution limit, if you’re 50 or older, is $30,000.
Nonelective contributions to a solo 401(k) made as an employer, are generally limited to 25% of compensation, according to the IRS. If you’re self-employed, your total contributions can’t exceed your earned income for the 2023 tax year.
There’s also an overall contribution limit of $66,000 for 2023. So, total contributions to a participant's account (not including catch-up contributions for those 50 and older), cannot exceed that amount.
When do RMDs start?
A required minimum distribution (RMD) is the minimum amount you must withdraw from your retirement savings account each year if you are at least 73 years old. Keep in mind that your RMDs generally must be taken by Dec. 31 (although there are some exceptions for inherited IRAs and Roth IRAs, and some recent RMD rule delays to know).
How are RMDs calculated? RMDs are calculated by dividing the value of your retirement account by a distribution period based on your age, in the year in which you take the distribution. Remember: RMDs are taxed as ordinary income and so can impact your federal income tax bracket.
Related: The Latest IRA RMD Rule Delay: What To Know
How much is the Saver’s Credit 2023?
Depending on your income, you may qualify for the Saver’s Credit, which is a tax break designed to encourage lower-and middle-income taxpayers to save for retirement.
For 2023, if your modified adjusted gross income (MAGI) is $36,500 or less, you may be eligible to claim up to $1,000 for the Saver’s Credit. If you’re married and filing jointly, your modified adjusted gross income must be $73,000 or less to claim the up to $2,000 credit.
The Saver’s Credit is based on a percentage (i.e., 10%, 20%, or 50%) of the first $2,000 (single filers) or $4,000 (married filing jointly) that you contribute to your 401(k), IRA, or Roth IRA retirement account. But rollover contributions won’t count toward the saver’s credit calculation.
Related: Savers Credit: Do You Qualify?
Looking ahead: What are the 401(k) contribution limits for 2024?
On Nov. 1, the IRS announced inflation adjustments for the 2024 401(k) contribution limits and the IRA contribution limit for 2024. The 401(k) contribution limit for 2023 increased to $23,000.
That 2024 401(k) contribution limit, which is $500 more than it was for the previous tax year, applies to employees who participate in not just 401(k) plans but also in most 457 plans and the federal government Thrift Savings Plan. The catch-up contribution limit for those age 50 or older participating in those plans will remain 7,500 for 2024.
Will the IRA contribution limit increase for 2024? The IRA contribution limit for 2024 is up by $500 from 2023. So, for 2024, you can contribute up to $7,000 to your IRA. If you’re 50 or older, the IRA catch-up contribution limit isn’t adjusted for inflation so, it will stay at $1,000 for 2024.
Related: IRA and 401(k) Contribution Limits Rise Again for 2024
Bottom Line
401(k) contribution deadline 2023: What you can do
Don’t wait for the year-end 401(k) contribution deadline to sit down and evaluate your savings for retirement. Instead, check your retirement savings account now to see if you’re on track to make your max 401(k) contributions by Dec. 31.
