Know the 2023 IRS contribution limits
The Internal Revenue Service (IRS) sets limits on the amount you can contribute to your workplace plan each year. For 2023, the maximum is $22,500. The catch-up contribution limit is $7,500. That means if you're 50 or older, you can save a total of $30,000.
How IRS rules affect your contributions
It's reassuring to receive employee benefits, but you need to be aware that there are limits, from maximum annual benefit earned under a defined benefit plan to Social Security taxable wage base. You can see the full list by downloading 2023 Employee Benefit Limits.
Consider saving 10% - 15%
One rule of thumb is to contribute at least 10% to 15% of your income to your plan each year. Some experts suggest saving even more. You can start by putting 6% of your pay into your plan and increasing it by 2% each year until you reach 10% or more. If possible, always contribute enough to get the full company match.
When you make pretax contributions to your plan, you lower your taxable income and reduce your tax bill. But your take-home pay isn’t reduced by as much as you're saving. For example, say you’re in the 25% tax bracket and make a $200 contribution to your plan each paycheck. You’d only reduce your take-home pay by $150.
Save more at 50 and over
You'll want to enjoy this phase of life in style — and also make sure you have enough saved to live well in retirement. Catch-up contributions let you contribute more money to your workplace retirement plan after age 50. You're eligible on January 1 of the year you turn 50, no matter how late in the year your birthday falls. The catch-up contribution for 2023 is an additional $7,500, for an annual total of $30,000. The catch-up contribution for IRAs is an additional $1,000, for a total of $7,500. You can also make a catch-up contribution of $1,000 to your spouse’s IRA, if your spouse is age 50 or over.