As the new year approaches, many people are looking ahead to the changes that will be coming to 401k plans in 2023. In this post, we’ll be exploring some of the most significant changes to 401k plans that you can expect to see in the new year, as well as providing some helpful resources for those who want to learn more about these changes.
One of the most significant changes to 401k plans in 2023 is the increase in the contribution limits. Currently, the contribution limit for 401k plans is set at $19,500 per year for those under the age of 50, and $26,000 for those 50 and over. In 2023, these limits are set to increase to $20,500 and $27,000, respectively. This change will allow individuals to save more for their retirement, and could be especially beneficial for those who are just starting to save for retirement or who are looking to increase their contributions.
Another change that is coming to 401k plans in 2023 is the increase in the age at which individuals are required to begin taking required minimum distributions (RMDs). Currently, RMDs must be taken starting at age 72, but in 2023 this age will be increased to age 73. This change is being made to align with the increase in the full retirement age under Social Security.
In addition to these changes, there are also a number of new provisions that will be included in 401k plans in 2023. One of these provisions is the ability to use 401k funds to pay for student loan debt. This will allow individuals to use up to $10,000 of their 401k funds to pay off student loans, without incurring the usual 10% penalty that is applied to early withdrawals.
Another new provision that will be included in 401k plans in 2023 is the ability to use 401k funds to pay for long-term care expenses. Under this provision, individuals will be able to use up to $10,000 of their 401k funds per year to pay for long-term care expenses, without incurring the usual 10% penalty that is applied to early withdrawals.
Finally, there are a number of changes that are being made to the rules surrounding 401k loans in 2023. One of the most significant of these changes is the increase in the amount that can be borrowed from a 401k plan. Currently, individuals are limited to borrowing 50% of their vested account balance, or a maximum of $50,000, whichever is less. In 2023, this maximum will be increased to $75,000.
In addition to these changes, there are also a number of new provisions that will be included in 401k plans in 2023 to make them more accessible and user-friendly. These provisions include the ability to enroll in a 401k plan automatically, the ability to make contributions on a pre-tax basis, and the ability to make catch-up contributions for those who are 50 and over.
Another helpful resource for those looking to learn more about the changes to 401k plans in 2023 is the Internal Revenue Service (IRS). The IRS regularly updates its website with information about the latest changes to 401k plans, and provides a wealth of information for those who are looking to better understand how these changes may impact their retirement savings.
In addition to the changes we’ve already discussed, there are a few other things that you should be aware of when it comes to 401k plans in 2023. For example, there are changes being made to the rules surrounding hardship withdrawals. Under the new rules, individuals will be able to take hardship withdrawals for a wider range of expenses, including expenses related to the purchase of a principal residence.
There are also changes being made to the rules surrounding rollovers, which allow individuals to transfer their 401k balances to other retirement accounts. Under the new rules, individuals will have more flexibility when it comes to rolling over their 401k balances, and will be able to roll over their balances more easily without incurring taxes or penalties.
Overall, there are many exciting changes coming to 401k plans in 2023 that will make it easier for individuals to save for retirement and meet their financial goals. For those who want to learn more about these changes, we’ve included a few helpful resources below:
- The Motley Fool: “New 401(k) Rules for 2023: What You Need to Know”
- [Investopedia: “401(k) Contribution Limits for 2023”](https://www.investopedia.com/retirement/401k
- The Balance: “Changes to 401(k) Plans in 2023”
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