What is the maximum annual contribution limit for a 401(k) in 2023?

The maximum annual contribution limit for a 401(k) plan in 2023 is set at $22,500 for individuals under the age of 50. For those aged 50 and older, there is an additional catch-up contribution allowed, which is $7,500. This brings the total possible contribution for those eligible seniors to $30,000 per year.

This structure supports retirement savings by incentivizing older employees to save more as they approach retirement age. Besides, the contributions to a 401(k) can reduce taxable income, allowing participants to save now and potentially pay taxes on their savings later when they may be in a lower tax bracket during retirement.

Understanding this limit is crucial for employers and employees when planning for retirement contributions and ensuring compliance with IRS regulations pertaining to 401(k) plans.