401(k) retirement savings plans are essential for your future as a retiree in the USA. There are many workers who do not take care of them properly. Neglecting your saving duties can only be negative for your financial situation as a retiree. Social Security benefits are just a support to your income but many people have not realized it is like that. In addition to this, you need to think that the rising cost of living will also affect your savings.
On the other hand, you cannot make as many 401(k) contributions as you like. Social Security also establishes limits for them. However, due to the new Cost of Living Adjustment Social Security has carried out, benefits and threshold have gone up. The COLA was 8.7%, the highest for many years. Thus, there was no other option but to increase them.
Not only have 401(k) contributions raised in 2023, but also some other options like traditional Individual Retirement Arrangements or 403(b). As Social Security makes these changes, it is advisable that workers try to set a new saving goal. Workers should stick to a budget and try to keep saving. Other sources of saving and investment should also be taken into account. You know what happens when you put all your eggs in one basket.
What are the new limits to your 401(k) contributions if you are 50 years old?
Those who are 50 years old in 2023 and want to make contributions to their 401(k) retirement savings plans have a new limit of 30,000 dollars. It has just increased by $7,500. It was much lower in 2022 reaching 22,500 dollars. Therefore, if you have managed to save money and do not know what to do with it, making contributions is always a great option.
Moreover, those who have IRAs instead of 401(k) and are 50 years old can contribute as much as 7,500 dollars. It was 7,000 in 2022. This amount includes the 1,000 dollars contribution to catch up for being 50. If you are younger than 50 the limit is $6,500. Apart from the aforementioned plans, those who are 50 and have either Thrift Savings Plan – that is for Federal government workers- or 403(b) can also make contributions up to $30,000.
Due to the new Secure 2.0 Act of 2022, there will be other changes in the years to come. There are several provisions to keep increasing those contributions. Take for example the 401(k) catch-up cap. In 2025 it will begin to be indexed to the new inflation of that year. So, it could mean that it increases every year if inflation goes up as well. Those who are between 60 and 63 in 2025 will be able to make higher contributions too.