401(k) Contribution Limits 2023

Despite the differences in who has a solo 401(k), there aren’t many other differences. Just like a “regular” 401(k), the solo 401(k) limit for 2023 is $66,000.

When leveraging a solo 401(k), you will probably need to link in your checking account using your routing number. Learn more about routing numbers here:

• How to Find Your USAA Routing Number
• How to Find Your Bank of America Routing Number

Can You Contribute to a 401(k) and an IRA?

In a word: yes, you absolutely can. IRAs have their own limit ($6,500 in 2023).

That said, there is no reason you can’t contribute to both. In general, the best bet is contribute up to your employer match (if you get one).

After that, it will depend on the 401(k) options you have available. IRAs often offer more freedom in terms of which funds you have available. I usually go for the most broadly diversified funds with the lowest fees.

401(k) Contribution Limits 2023 Over 50

For those aged 50 and over, the catch-up contribution limit in 2023 is now $7,500.

If you aren’t familiar with catch-up contributions, they allow those 50 and over to contribute additional money to their 401(k). Thus, those aged 50 and over can have a total contribution limit of $30,000 in 2023.

Again, there is no reason not to take full advantage of this additional limit for those nearing retirement. Saving more is always better, especially works in their “catch-up” years are nearing age 59 & 1/2, when they can start taking distributions.

Also, there are no other requirements one must meet in order to make catch-up contributions. However, your employer must allow them.

If you are over 50 and your employer allows them, you are eligible to make catch-up 401(k) contributions.

Roth 401(k) Limits: Is There a Difference?

Many workers opt to invest in a Roth 401(k) because this type of account will allow you to withdraw money tax-free in retirement. If you are one of them, you may be wondering whether Roth 401(k) limits are the same as the traditional 401(k).

While things may often seem complicated when it comes to retirement accounts, this one is fairly straightforward.

That’s because Roth 401(k) limits are also $22,500 in 2023.

In reality, there are not a huge number of differences between Roth 401(k) vs traditional other than how they are taxed.

Keys to 401(k) Investing

There are four main strategies you should always leverage when it comes to your retirement:

1. Maximize employer matching
2. Maximize pre-tax contributions
3. Minimize total taxes paid
4. Invest for the long haul

These are our main goals. The last one will not necessarily be impacted by how you structure your savings, but the others almost certainly will.

 

It should also be noted that you might not be able to achieve all of these at the same time. I know I’m not. For example, I am not even coming close to maxing out my pre-tax contributions. But more on that later.

Nevertheless, the closer you can get to achieving all of these goals, the safer and more secure your future will be.

Other Considerations

There are also other considerations, such as the amount of the match (if you get one), the funds offered by your employer, whether the funds are “mobile,” and so on.

This mobility idea is actually a very important consideration. You know that phrase “You don’t know what you don’t know?” That could not have been truer for me. With my previous employer, the money they matched on my retirement plan had a time requirement before I was fully vested.

Because I wasn’t fully vested, I lost the entirety of the money. Obviously, I didn’t do this on purpose, but because of that mistake, I lost over $4,000. While it may be difficult or impossible to avoid this scenario, it’s good to at least be aware of the possibility. I wasn’t.

Bottom line: because there are so many variables, you’ll want to meet with someone in HR to discuss all of the options offered by your employer.

401(k) Contribution Limits 2023 in Summary

Remember that for 2023, 401(k) contribution limits are $22,500.

This also applies if you have other types of plans such as a 403(b) and most 457 plans. These plans also have a $22,500 limit for 2023.

The catch-up 401(k) contribution has increased to $7,500. This applies only to workers aged 50 and over.

Be sure to take advantage of your 401(k) and all the retirement accounts at your disposal. After all, these are some of the most beneficial retirement accounts.

Related:

• ESG Investing: A Better Future Through Investing?
• Prioritizing Savings And Debt: Which Is More Important?
• How to Invest With Little Money