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Every year, various retirement and healthcare savings accounts see changes in their contribution limits. These limits are designed to encourage individuals to save as much as possible for their future healthcare and retirement needs. The contribution limits for 2023 have recently been announced, with most accounts seeing an increase from the 2022 limits.
401(k) Contribution Limits
For those who have access to a 401(k) through their employer, the contribution limit for 2023 increased to $20,000 from $19,500 in 2022. This limit applies to both traditional and Roth 401(k)s. For those over 50 years old, the catch-up contribution limit remains at $6,500, for a total contribution of $26,000.
IRA Contribution Limits
For those who have an individual retirement account (IRA), the contribution limit for traditional and Roth IRAs remains the same at $6,000 in 2023. The catch-up contribution limit for those over 50 years old also remains the same at $1,000, for a total contribution of $7,000.
Health Savings Account (HSA) Contribution Limits
For those with a high-deductible health insurance plan, the contribution limit for an HSA increased to $3,750 for individual coverage and $7,500 for family coverage in 2023, up from $3,650 and $7,100 respectively in 2022. Those over 55 years old can contribute an extra $1,000 as a catch-up contribution.
Flexible Spending Account (FSA) Contribution Limits
For those with a flexible spending account (FSA), the contribution limit increased to $2,850 in 2023, up from $2,750 in 2022. This limit only applies to healthcare FSAs, not dependent care FSAs. It’s important to note that FSAs are “use it or lose it” accounts, which means that any contributions that aren’t used for qualifying expenses by the end of the plan year will be forfeited.
Overall, these contribution limit increases offer an opportunity for individuals to save more for their future healthcare and retirement needs. It’s important to review your current savings and contribution levels to ensure that you’re taking advantage of these limits and maximizing your savings potential. By starting early and contributing as much as possible to these accounts, individuals can help secure a more financially stable future.
Thanks for the update
There’s a special type of FSA – dependent care FSA that you might be able to utilize if you have a little one.
This has helped me understand the differences better, but I still don't understand any of the plans all that much as schools don't teach us it anymore.
I'm excited for this! Investing more + decreasing taxes. A win-win in my book ⚡
You didn't mention the retirement plans for self-employed (like yourself) who make big money and want to save more. The SEP-IRA allows you to contribute up to 20% of your net employment income up to a limit of $61K in 2022 or $66K in 2023. The individual 401K (also called solo 401K) allows you to make an employee contribution up to $20.5K in 2022 or $22.5K in 2023 plus catchup and an employer contribution of up to 20% of your net employment income up to a limit of $40.5K in 2022 or $43.5K in 2023. For the i401K, you are both the employee and the employer. Both total limits are the same but because the i401K is split you can hit the limit with less income; moreover, you are eligible for a catch-up contribution if you are over 50.
You can open an individual 401K at Vanguard or Fidelity for no cost just some paperwork, but Vanguard limits investments to only Vanguard mutual funds whereas Fidelity allows investments in all MFs, ETFs, and stocks.
You can qualify for the 2022 SEP-IRA contribution limit with net SE income of $61*5=$305K or the i401K limit with net SE income of $40.5*5=$202.5K. The gross income has to be higher to account for SE tax and other deductions.
IMPORTANT DISCLAIMER: This stuff is complicated so be sure to check with your accountant or tax professional. Sean Mullaney, the FI Tax Guy, wrote a recent book about Solo 401K and did a book tour while appearing on many podcasts including ChooseFI.
I hope that many years from now when we are still following Personal Finance with Leila YouTube channel, you will be successfully self-employed bringing in the big bucks and hitting these limits. For example, you could be a self-employed Salesforce consultant. Dream big!
I like the FSA but you have to be careful. I know exactly what my expected medical expenses are going to be, so I plan for that amount and use every dollar. The HSA isn't an option with my insurance, so this is the best option I have. I make a pretty good salary, so every little bit to lower my tax burden is worth it to me.
I am so grateful for your channel and the fact that you put in the work to do the research and share your knowledge. I don't think the student loan blockage was shared as widely as it should have been, and I literally found out about it from your channel. Thank you for all that you do!
FSAs are great, if you have known medical expenses, medicine, Dr appts, Glasses, dental appointments etc and if you get to the end of the plan year, OTC pain killers, allergy meds, first aid kits, bandages are all FSA eligible … Even menstrual products are FSA eligible.
Why pay income taxes on that money?? and you don't pay FICA on it.
Hi there, thank you for all your great content! I was approached by someone from Primerica for starting a Roth IRA. What are your thoughts on investing through them?
So helpful!
Always appreciate your helpful info! Thank you! Have a great week!
The internet needs you, keep up the great videos!
FSA is great for people that have maintenance meds or known appointments throughout the year. Maybe you know you always spend $500 a year on contacts or $25 a month on a prescription that you take. Always good just to underestimate it slightly due to the risk of use or lose. Also I believe HSA is usually only offered to those that have a high deductible plan.
Yes, I just heard a few hours ago that the Roth IRA was increased. I’ve already adjusted my 2023 budget. I plan on doing $540/month with auto pay and then throw in an extra $20 in January.
I've decided to pretend i got 0 pay increase. I'll just budget on my old salary and my pay increase will blindly go into retirement. In my country we don't have Roth IRA but we do have something similar.
Thanks for the info! I’m curious if you know the rules around families on different insurances.
If my wife and kids are on an HSA eligible plan and I am on a different plan that is not HSA eligible, can my wife contribute the family max amount of $7,750 to her HSA, or only the individual max of $3,850 because I am not on an HSA eligible plan?