The federal government will allow you to save nearly 10% more for retirement in 2023. But it’s not likely that many will take advantage of the tax break. The simple reason: Most people don’t make enough money to save more from their paychecks.
The average amount that participants contribute is 7.3% of their salary, according to Vanguard’s How America Saves 2022 report. At that rate, you’d have to make more than $300,000 to hit the $22,500 maximum amount an employee can save in a workplace plan for 2023, up from $20,500 in 2022. To put it another way, to save the max, you’d have to put aside $1,875 per month, or $865 per paycheck if you’re paid biweekly.
Only 14% of participants saved the maximum amount in 2020.
Few people will also likely take advantage of the increase in the catch-up contribution limit, which will allow those 50 and older to contribute an extra $7,500, up by $1,000 from 2022, for a total of $30,000. Vanguard’s report found that only 16% of those eligible participate, even though 98% of plans allow for catch-up contributions.
“The max numbers are very high. A lot of people don’t make that kind of money,” says Anqi Chen, assistant director of savings research at the Center for Retirement Research at Boston College.
You might not need to max out
Not everyone needs that kind of money put away for retirement. The key is to save over time to eventually be able to replace your current income in…
The limit for 401(k) contributions will jump nearly 10% in 2023, but it’s not always a good idea to max out your retirement investments
The federal government will allow you to save nearly 10% more for retirement in 2023. But it’s not likely that many will take advantage of the tax break. The simple reason: Most people don’t make enough money to save more from their paychecks.
The average amount that participants contribute is 7.3% of their salary, according to Vanguard’s How America Saves 2022 report. At that rate, you’d have to make more than $300,000 to hit the $22,500 maximum amount an employee can save in a workplace plan for 2023, up from $20,500 in 2022. To put it another way, to save the max, you’d have to put aside $1,875 per month, or $865 per paycheck if you’re paid biweekly.
Only 14% of participants saved the maximum amount in 2020.
Few people will also likely take advantage of the increase in the catch-up contribution limit, which will allow those 50 and older to contribute an extra $7,500, up by $1,000 from 2022, for a total of $30,000. Vanguard’s report found that only 16% of those eligible participate, even though 98% of plans allow for catch-up contributions.
“The max numbers are very high. A lot of people don’t make that kind of money,” says Anqi Chen, assistant director of savings research at the Center for Retirement Research at Boston College.
You might not need to max out
Not everyone needs that kind of money put away for retirement. The key is to save over time to eventually be able to replace your current income in…
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