Saving for retirement just got a little sweeter. Beginning in 2013, employees will be able to contribute $17,500 a year before taxes to their 401(k)s. That’s up from $17,000 currently. While it might not sound like much, compounding interest over a 20- or 30- year period could result in a sizable sum.
The announcement by the IRS on Thursday marks the second year in a row the government agency has added $500 to the contribution limit.
However, as CNN Money notes, the catch-up contribution limit, which is the additional amount of tax-free money employees over the age of 50 can contribute to their retirement plans, on top of the $17,500 that any employee can contribute, remains unchanged at $5,500.