Thanks to the new cost-of-living adjustments announced by the Internal Revenue Service today, taxpayers can stash an extra $500 in their 401(k) retirement piggy banks next tax year.
The mandatory increase accounts for inflation, which hasn’t been raised since 2009. Previously, the inflation rate had been to low to merit the change.
The IRS is raising the maximum annual contribution employees can make before paying taxes from $16,500 to $17,000.
The limits also apply to contributions to similar accounts, such as federal employee-held Thrift Savings Plans, most 457 plans, and 403(b) plans for nonprofit workers and school employees.
The “catch-up” contribution limit for those ages 50 and over will remain at $5,500.
The IRS announcement on cost-of-living adjustments also affects the personal exemption, income thresholds, and standard deductions for a variety of benefits and tax brackets.
Personal exemptions will rise from $100 to $3,800, while the standard deduction for married couples will rise from $11,600 to $11,900 next year.
As we’ve reported, taking up your employer on his 401(k) match is the simplest way to double your savings, though only 29.4% of respondents in a FINRA survey actually do it.