The 403(b) retirement plan can help you save a lot for when you stop working. But the IRS limits the amount you can contribute each year.
403(b) contribution limits for 2022
The 2022 403(b) contribution limit is $20,500 for pretax and Roth employee contributions. The combined employee and employer contribution limit is $61,000. Employees who are 50 and older can save an extra $6,500 in catch-up contributions, bringing their employee contribution limit to $27,000. But your total contributions can't surpass your yearly earnings at the employer that offers your plan.
403(b) contribution limits for 2023
The 2023 403(b) contribution limit is $22,500 for pretax and Roth employee contributions. The combined employee and employer contribution limit is $66,000. Employees who are 50 and older can save an extra $7,500 in catch-up contributions, bringing their employee contribution limit to $30,000. As in 2022, your total contributions can't surpass your yearly earnings at the employer that offers your plan.
Roth 403(b) contribution limits
If you have access to a Roth 403(b), your contribution limit is the same as for those with traditional 403(b) plans. Keep in mind that if you contribute to both types of plans in the same year, your contribution limit carries across accounts. In other words, in 2023 you could put away up to $22,500 total across your Roth and traditional 403(b) accounts (if you don't qualify for catch-up contributions). Accounts that are considered in this contribution limit are 401(k) plans, 403(b) plans, SARSEP IRA plans, and SIMPLE IRA plans.
|403(b) contribution limits|
|Pretax and Roth employee contributions||Employee and employer contributions||Catch-up contributions (in addition to the employee and employer limit)|
|403(b) contribution limit for 2022||$20,500||$61,000||$6,500|
|403(b) contribution limit for 2023||$22,500||$66,000||$7,500|
403(b) catch-up contributions for employees with long tenures
Long-serving employees who have been eligible for the same employer 403(b) plan for at least 15 years may be able to save even more in their 403(b) each year. This is depending on your specific plan, though. Unlike other catch-up contributions, this is true no matter the employee's age, though some 403(b) plans may not allow it depending on plan limitations. Those who have contributed even well below their annual maxes may find themselves unable to take advantage of it due to the strict requirements imposed.
If your 403(b) permits this type of catch-up contribution and you meet the 15-year requirement, you may be able to save up to an additional $3,000 each year, until you reach a total of up to $15,000 in contributions.
The exact amount you can contribute may be reduced based on your previous contributions to your employer's plans. For example, if you have worked for your employer for 15 years but contributed $75,000 or more over that period to retirement plans with that employer, you would not be able to contribute more under this rule.
Because the math can get complex, check with your plan sponsor to see if this catch-up is available to you, as well as how much extra you may be able to contribute.
403(b) contribution limits when you have multiple employer-sponsored retirement plans at different employers
Those with access to multiple employer-sponsored retirement plans (think: 403(b)s, 401(k)s, SARSEP IRA plans, and SIMPLE IRA plans) through different employers are limited to the total employee contribution amount for the year. You as an employee can only contribute up to $20,500 in 2022 or $22,500 in 2023 pre-tax across all of the employer-sponsored plans for which you are eligible. Those 50 and older may be able to contribute more through catch-up contributions.
Each employer, however, may contribute up to the employee and employer maximum for that year, regardless of how much your other employers contribute.
How do these limits affect what you can contribute to an IRA? They don't. You can max out your contributions to both an employer-sponsored retirement plan as well as to an IRA. Depending on you income level, however, you may not be able to deduct what you contribute to a traditional IRA.
After-tax 403(b) contribution limits
If you hit the limit of what you alone can save in a 403(b), there might be a chance for you to put away more. If your plan allows for after-tax contributions, you can contribute dollars you've already paid taxes on into a traditional 403(b), which generally only holds pre-tax money.
After-tax contributions let you save up to the total employee and employer contribution limit for the year, provided your existing employee and employer contributions do not exceed the limit. So if you were under 50 and had already contributed $22,500 and your employer had put in $22,500 in 2023, you could save an additional $21,000 in after-tax contributions to take your total to $66,000.
Not all 403(b) plans permit after-tax contributions. If you'd like to set aside more money for retirement than your plan allows, you may want to look into an IRA.
What happens if you contribute too much to your 403(b)?
Overcontributing to a 403(b) can result in a penalty of any unpaid income taxes on the excess contributions in the year you overcontributed and in the year when you finally take them out, plus a 10% early withdrawal penalty if you're under 59½. Excess contributions should be listed on Form 1099-R when you file your tax return.
Most 403(b) plans have guardrails to keep you from overcontributing. But you may want to be extra careful if you've switched jobs or can access more than one workplace plan in a given year. If you accidentally save too much in your 403(b) reach out to your plan administrator to correct the issue.
You should receive your overcontribution, plus any earnings it made, by April 15. This is considered taxable income and should be reported on a modified W-2 form when you file your taxes.
How much should you contribute to your 403(b)?
Determining the right amount to save for retirement can be tricky, particularly when it's decades away.
Fidelity suggests to aim to save at least 15% of your income each year for retirement. That includes employer contributions and anything you save in other accounts, such as IRAs.
How to maximize your 403(b) contributions
THere are a few tips and strategies to consider:
- Starting to invest as early as possible The sooner your money gets in the market, the longer it has the potential to benefit from compound interest. If your investment returns earn returns of their own, saving for retirement could become easier.
- Ensuring you get the maximum employer contributions Your organization may match your 403(b) contributions based on how much you save. Aim to contribute at least enough to your 403(b) to get your full match. And remember: Any amount that your organization contributes is something you don't have to.
- Making progress toward saving more for retirement We know—it can be difficult to save at least 15% of your salary for retirement, especially early in your career. Don't let that number intimidate you from saving anything though. (And remember that it does include any percent that your employer contributes too.) Thanks to compounding, even small amounts have the potential to become bigger sums over time. But make it a priority to boost your contribution rate when you can, whether that's by 1% each year or each time you get a raise. If you wind up with extra cash, such as from a bonus or side gig, consider saving at least some of it for retirement too.
- Hunting down old retirement accounts Parting ways with a job doesn't mean you're also saying goodbye to your retirement plan there. A surprising amount of people forget about retirement savings they've built up at old employers. Check your work history to see if there may be accounts you've forgotten about. If you find some, learn more about retirement account rollovers so you won't lose track of them again.