Last year, adjustments were announced across conventional contribution limits for employees. In the United States. These various investment options should be taken into consideration for your financial health.
Funds you may already be contributing to have seen limit increases, meaning that it could make sense to increase your contributions depending on your financial goals.
What are the changes? Let’s discuss.
Why Were Limits Increased?
The reason for the increase in contribution limits is quite simple — inflation. Each year, contribution limits for your IRA, 401(k), HSA and more see adjustments take place to account for cost-of-living adjustments. Because inflation has been high for two consecutive years, it’s no surprise that we’re seeing the limit increase.
Traditional IRA and Roth IRA Limits Increased
For individuals looking to maximize their retirement savings through Individual Retirement Accounts (IRAs), good news! The contribution limits for Traditional and Roth IRAs have been raised to $7,000 in 2024, up from the previous limit of $6,500. These changes provide an opportunity to boost your retirement nest egg.
For individuals over the age of 50 and nearing retirement, the catch-up contribution stipulation allows for increased limits for retirement plans. The catch-up amount for an IRA is $1,000, now allowing for a total of $8,000 in contributions for people 50+. For a 401(k), the catch-up amount is $7,500, now allowing for a total of $30,500 in contributions.
Health Savings Accounts (HSA) Limits Upgraded
Health Savings Accounts (HSAs) are crucial for many families. In 2024, the contribution limits for HSAs have seen a notable uptick. For individuals, the limit has increased to $4,150 from the previous $3,850. For families, the limit has risen to $8,300 (formerly $7,750). This expansion enables individuals and families to set aside more pre-tax dollars for qualified medical and pharmaceutical expenses. For many families, this means flexibility and financial security when managing healthcare costs when and where they need it.
Enhanced 401(k) Contributions for Employees
401(k) plans are a cornerstone for retirement savings among individuals and one of the most conventional retirement options for employees. This year, the maximum contribution limit for employees participating in retirement plans rose to $23,000 from $22,500. This adjustment allows individuals to capitalize further on the benefits of 401(k) plans, aiming for greater financial stability during their retirement years.
At LPSC Financial, we encourage our clients to stay informed and make strategic decisions that align with their unique financial objectives.