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Are You Maximizing Your Retirement Potential?

Natalie Montanez

Why it matters

  • If you can, contributing the maximum amount the IRS allows each year to your retirement account will help you maximize your retirement potential.
  • Maximum contributions to IRAs, 401(k)s, and 403(b)s have increased for 2023.
  • Catch-up contributions to 401(k)s and 403(b)s have also increased.

Whether retirement is around the corner or still a ways down the road, now is a great time to start or increase contributions to your retirement savings accounts. (If you’re a little rusty on the basics, check out our quiz on how to save for retirement.) The more you’re able to save, and the more time you have to make your contributions, the more likely you’ll be able to live the lifestyle you want in retirement. So let’s explore how you can maximize your retirement potential.

How much should you contribute to retirement?

There’s no set rule for how much you should contribute to your retirement savings. Several factors — like your age, income, and financial obligations — impact that number. But most financial professionals agree that saving 15 percent of your annual income is a good target. But the later you start saving, the more you should contribute.1 When deciding how much you need to save, consider target retirement savings by age.

If you’re lucky enough to have an employer-sponsored retirement savings account — like a 401(k) or 403(b) — you should enroll in the plan and contribute as much as you’re able. Many employers will match your contributions dollar for dollar, up to a certain percentage. At the very least, contribute as much as your employer matches.2 Otherwise, you’re missing out on extra money. Also, 401(k) and 403(b) contributions are made with pre-tax deductions from your paycheck, so they lower your taxable income for the year.

If you don’t have access to an employer-sponsored plan, then think about contributing to an individual retirement account (IRA). There are a few types of IRAs, but the most common are traditional and Roth. Most people can deduct either a portion or all of their contributions to a traditional IRA from their taxes for that year.3 Your contributions to a traditional IRA being tax deductible or not depends on your income level and whether you’re covered by a retirement plan through your employer. When you start withdrawing funds from a traditional IRA, you’ll pay income tax on the money then.

On the other hand, contributions to a Roth IRA are made with after-tax dollars, so they don’t lower your taxable income right now. However, you won’t pay taxes when you start to pull funds in retirement.

2022 and 2023 retirement contribution limits

If you’re reading this, you probably want to put as much money as you can into your retirement account. But you should know that the IRS sets annual contribution limits for retirement accounts. The limits have increased for 2023 due to recent cost of living adjustment (COLA) changes.4 If you have a SIMPLE, SEP, or other type of IRA, don’t forget to review their annual contributions limits, as well.

401(k) and 403(b) contribution limits for 2022 and 2023

In 2023, you can contribute up to $22,500 to 401(k) or 403(b) plans. The limit for these plans was $20,500 in 2022 and $19,500 in 2021.5

Traditional IRA and Roth IRA contribution limits for 2022 and 2023

While traditional and Roth IRAs are very different, they share the same contribution limit. In 2023, you can contribute a maximum of $6,500 to either of these types of IRA, up from $6,000 in 2022.6 Keep in mind that you might not be allowed to contribute the full amount — or at all — to a Roth IRA if you make above a certain income for your tax filing status.7

Take advantage of catch-up contributions

If you’re 50 or older, you’re allowed to make what’s called a “catch-up contribution” to your retirement account every year. These special contributions increase your annual contribution limit by a specific amount, giving your retirement savings an extra boost. They’re especially helpful if you weren’t able to save enough at an earlier age and want to make up for lost time.8

Catch-up contribution limit for 401(k) and 403(b) plans

In 2023, the catch-up limit for 401(k) and 403(b) plans is $7,500.8 This means you could contribute up to a total of $30,000 to your plan in one year.

Catch-up contribution limit for IRAs

In 2023, the catch-up limit for traditional and Roth IRAs is $1,000.8 This means you could contribute up to a total of $7,500 in one year to your IRA.

Can you contribute to an IRA, 401(k), or 403(b) account after retirement?

People are living longer, and that’s good news. But it also means we have to plan for longer retirements and all the possibilities they can bring. Continuing to fund a retirement account while retired might be a good option for many of us.

If you have an employee-sponsored plan, you can only contribute to it while you’re employed. So if you leave your job for any reason — including retirement — your payroll deductions to that plan will stop. However, you’re generally still free to leave the money in your account, as long as you have at least $5,000 invested.9 It can continue to grow, tax-deferred, and you’ll be able to take distributions from it.

To continue making contributions during retirement, you’ll need to roll over the money in your 401(k) or 403(b) to an IRA. As long as you have some kind of earned income, you can contribute to either a traditional or Roth IRA throughout your retirement.10 Previously, people weren’t allowed to contribute to their traditional IRAs after age 70½, but the SECURE Act of 2019 did away with that rule.10

That’s a quick overview of ways you can maximize your retirement potential by maxing out your contributions. As always, it’s a good idea to speak with your financial professional if you have questions about saving for your retirement. They can help you determine if you’re putting enough away and whether you’ll want to continue your contributions after you retire.

Things to consider

  • Aim to contribute 15 percent of your annual salary to your retirement accounts.1
  • If your employer matches your contributions to their retirement savings plan, contribute at least the minimum to get that match.2
  • If you don’t have access to a 401(k) or 403(b) through your employer, consider contributing to a traditional or Roth IRA.


1 What Percentage of Your Salary Should Go Toward Retirement,” Investopedia.com, March 2022

2How Much Should I Contribute to My 401(k)?” Investopedia.com, October 2022

3 Individual Retirement Accounts,” FINRA.org, accessed December 2022

4COLA Increases for Dollar Limitations on Benefits and Contributions,” IRS.gov, October 2022

5Retirement Topics: 401(k) and Profit-Sharing Plan Contribution Limits,” IRS.gov, October 2022

6401(k) Limit Increases to $22,500 for 2023, IRA Limit Rises to $6,500,” IRS.gov, October 2022

7Roth IRA Basics,” Investopedia.com, November 2022

8Catch-Up Contribution: What It Is, How It Works, Rules & Limits,” Investopedia.com, December 2021

9Understanding 401(k) Withdrawal Rules,” Investopedia.com, January 2022

10Can a Person Who Is Retired Continue to Fund an IRA?” Investopedia.com, November 2022

Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.