403(b) & 401(k)
Contribution Limits for 2023:
How Much Can You Contribute?

If you’re looking to make the most of your 403(b) & 401(k) contributions, you’ll want to know about the limits for 2023. This article will discuss the contribution limits for 2023 and how they might affect you. Keep in mind that these limits are subject to change, so be sure to check back often for updates!

What are the 403(b) & 401(k) contribution limits for the 2023 tax year?

403(b)(9) contribution limits are set by the internal revenue service (IRS) and usually change yearly. For 2023, the employee’s contribution or elective deferral limit is $22,500. This means that an employee can contribute up to $22,500 of their salary to their 403(b) and/or 401(k) account(s) in 2023. The annual limit for both employer and employee contributions is $66,000 to your retirement plan. An increase of $5,000 from 2022.

If you’re over the age of 50, you can make catch-up contributions of up to $7,500 to your retirement plan for a total contribution limit of $30,000. Taking the total annual contribution limit between employee and employer contribution totals to $73,500. Currently, this is the maximum amount for the 2023 tax year. This is an increase of $6,000 from 2022.

What are the benefits of contributing to a 403b account?

403(b) plans are retirement savings plans that are offered to public school system employees, religious employees, and certain nonprofit organizations employees. These plans are similar to 401(k) plans that are offered by for-profit employers. Employees can make elective deferrals from their paychecks into their 403(b) retirement accounts. Employers may also make contributions to their employees’ retirement accounts. The money in 403(b) accounts can grow tax-deferred. This means that employees will not pay taxes on the funds in their 403(b) accounts until they withdraw the money from their accounts, usually after they retire.

When employees withdraw cash from their accounts after they retire, they will pay taxes on the funds at their current income tax rate. An employee with a 403(b) account may also be able to take loans from their 403(b) accounts. If a loan is taken from a 403(b) account, it must be repaid with interest. If an employee leaves their job before they repay their loan, the outstanding loan balance will be treated as a withdrawal and may be subject to income taxes and possible penalties. Employees should consult with a tax advisor to determine whether taking a loan from their 403 b account is right for them. 

Benefits of contributing to a 403(b) account include:

• Tax benefits.

  Elective deferrals to a 403(b) plan are made on a pre-tax basis, which reduces your gross income in the year you make the contribution. For example, if you are in the 25% tax bracket and contribute $1,000 to a 403(b) plan, your taxable income is reduced by $1,000. This saves you $250 in federal income taxes (assuming no state income taxes). 

• Investing for retirement.

  403(b) plans can help you save for retirement. However, the sooner you start saving, the more time your investment has to grow. 

• Employer matching contributions.

  Many employers offer matching contributions to 403(b) retirement plans. Employer contributions are essentially free money that can help you reach your retirement savings goals faster. 

• Tax-deferred growth potential.

  The earnings on your 403(b) plan contributions grow tax-deferred until you withdraw them at retirement. This can result in a larger account balance than if the earnings were taxed each year. 

• Loan features.

  Some 403(b) plans allow you to borrow money from your account for certain expenses, such as buying a home or paying for education expenses. The loan must be repaid with interest over a period not exceeding five years (or longer if the loan is used to buy your primary residence). 

• Penalty-free withdrawals for certain expenses.

  You may be able to withdraw money from your 403(b) account without paying the 10% early withdrawal penalty if you use the withdrawals to pay for qualified higher education expenses or certain medical insurance premiums after losing your job. 

How do I make contributions to my 403b account?

Elective deferrals and employer contributions are two ways to contribute to your 403b account. Employees make elective deferrals, and the elective deferral limit for the 2023 tax year is $22,500. Employer contributions can be made in the form of matching contributions or profit-sharing contributions.

Contributions to a 403b account are not tax-deductible; however, they grow tax-deferred until withdrawal. Withdrawals from a 403b account are subject to federal income tax and, in some cases, state and local income taxes as well. Withdrawals before age 59 1/2 may also be subject to a 10% federal penalty tax. Please get in touch with your employer or plan administrator for more specific information on how to make contributions to your 403b account.

How should you invest your 403b contributions?

There are a few things to consider when deciding how to invest your 403b contributions. First, you’ll want to think about your goals. Are you saving for retirement? A child’s education? A down payment on a house? Once you know your goals, you can start to look at different investment options and decide which one is right for you.

There are many different ways to invest your money, so it’s essential to do some research and find the option that best suits your needs. You’ll also want to consider how much risk you’re comfortable with. Some investments are riskier than others, but they also have the potential for higher returns. If you’re unsure where to start, many resources are available to help you learn about investing and make the best decision for your future.

Investing That Matches Your Biblical Worldview.

The Bible speaks to every area of our lives, including how we handle our finances. When it comes to investing, there are several different approaches that Christian investors can take. However, not all investment strategies are compatible with a biblical worldview.

For example, some investments may be based on companies that produce or promote products that are contrary to biblical values. As a result, Christian investors need to be careful about where they put their money. There are a number of different resources available to help Christians make wise investment choices that align with their faith. These resources can help investors find companies that share their values and avoid those that don’t. By taking a biblical approach to investing, Christians can ensure that their money is being used in ways that honor God and reflect His values.

At Envoy Financial, we desire to walk alongside Christ followers in their journey of Biblical Financial Stewardship. We strive to be uncompromising in reaching for returns while being uncompromising in our Biblical Worldview. If you want more information on opening a 403b retirement plan or on Biblically Responsible Investing, please contact us at (888) 879-1376 or visit us at www.EnvoyFinancial.com.