On The Money — Why the IRS is letting you put more in your 401(k)
Inflation is forcing the IRS to change how much people can contribute for retirement. We’ll also look at a battle between Democrats and the Federal Reserve, and how many Americans have applied for student loan forgiveness.
But first, see how lawmakers are riding a wave of Swiftie fandom.
Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Aris Folley, Sylvan Lane and Karl Evers-Hillstrom.
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IRS raises 401(k) contribution levels due to inflation
The IRS on Friday raised 2023 contribution limits for tax-advantaged retirement accounts to adjust for soaring inflation.
Individuals will be able to contribute $22,500 to their 401(k), 403(b) and related retirement accounts, up from $20,500 this year.
Those who are 50 and older can give $30,000, a year-over-year increase of $7,500.
The IRS also increased the contribution limit for individual retirement accounts (IRAs) and Roth IRAs. Individuals will be able to put $6,500 toward those accounts next year, an increase of $500.
The IRS this week also announced a larger standard deduction and more generous tax brackets for the 2023 tax year. The cost-of-living adjustments come after consumer prices rose 8.2 percent over the last year, driven by higher costs for food and rent.
Karl has the details here.
🏛 TAKE A HIKE
It’s left vs. Federal Reserve on interest rates hikes
Progressive Democrats are ripping the Federal Reserve over deepening concerns the central bank could drive the U.S. into recession amid sky-high inflation not seen in four decades.
Top liberal lawmakers are urging the Fed to stop hiking interest rates and slowing the U.S. economy, insisting that it’ll do nothing to curb inflation while plunging millions into joblessness.
“I think they’re hurting the situation,” Sen. Bernie Sanders (I-Vt.), the chairman of the Senate Budget Committee, said Sunday on NBC’s “Meet the Press,” referring to the Fed’s rate hike campaign.
The context: The Fed aims to slow inflation by raising interest rates and reducing the amount of money households and businesses have to spend.
Less spending in the economy should force businesses to lower their prices to compensate for slower sales, but also push them to hire fewer employees and at lower wages.
Fed officials are hopeful they can raise rates high enough to bring inflation down from an annual rate of more than 8 percent without serious damage to the economy.
But Fed Chairman Jerome Powell, who was first appointed by former President Trump, warned that inflation is far too high to come down without “pain,” dashing hopes for a “soft landing” where Americans keep their jobs.
Sylvan has more here.
🎓 APPLY NOW
Biden says almost 22M Americans have applied for student loan forgiveness
President Joe Biden announced on Friday that nearly 22 million Americans have applied for his administration’s student loan forgiveness program.
Millions have been applying for the relief every day since the application was beta-launched on Oct. 14.
Biden said during his speech that “the vast majority are applying on their phones” for the debt relief.
“It’s about as easy to apply as signing up while hanging out with your friends or at home and watching a movie,” Biden said, noting this program can help 40 million Americans.
The Hill’s Lexi Lonas has more here.
🦃 PRICEY TURKEY
Supply chain woes, inflation could push up cost of Thanksgiving turkeys
Thanksgiving turkeys will likely skyrocket in price this year due to inflation, supply chain issues and outbreaks of the avian flu among flocks.
Inflation and economic instability have caused turkey prices to shoot up as farmers pay more for their feed and labor, while supply shortages continue to affect the industry, according to The New York Times.
The Department of Agriculture found that the average price of frozen turkeys is up by 73 percent since last year.
On Wednesday, the wholesale price had inflated to $1.85 per pound, compared to 90 cents per pound in 2019, according to price reporting agency Urner Barry.
Chloe Folmar has more here.
Good to Know
President Biden on Friday touted recent figures showing the federal budget deficit fell by $1.4 trillion in fiscal 2022 from the prior year’s levels as Democrats work to fend off Republican attacks on the economy and inflation ahead of the midterm elections.
Biden boasted the decline as “the largest one-year drop in American history” in remarks to reporters.
Other items we’re keeping an eye on:
Shares of Twitter fell Friday amid concerns driven by Elon Musk’s potential acquisition of the company and a federal investigation.
Biden on Friday bashed Republicans who have attacked his student loan forgiveness plan, calling out certain lawmakers like Sen. Ted Cruz (Texas) and Rep. Marjorie Taylor Green (Ga.).
Ye’s purchase of the right-wing social media app Parler may do little to reignite the floundering platform, but critics say the acquisition could further consolidate the power of ultra-wealthy men to shape the online ecosystem based on their own ideological views.
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