As we approach 2024, it’s essential to prepare for the financial changes that come with it. One critical aspect of financial planning is understanding the annual contribution limits for various accounts, as these limits can significantly impact your ability to save and invest for the future. In this article, we’ll take a closer look at the contribution limits for some of the common financial accounts in 2024.

1. Retirement Accounts: 401(k) and IRA

Saving for retirement is a cornerstone of financial planning, and two primary vehicles for retirement savings are 401(k) plans and Individual Retirement Accounts (IRAs). In 2024, the contribution limits for 401(k) plans have been raised. You can now contribute up to $23,000 annually, an increase from the previous limit of $22,500. For those aged 50 and older, the catch-up contribution limit remains at an additional $7,500, allowing them to contribute up to $30,500.

IRAs have also seen a slight increase in contribution limits. The annual limit for both Traditional and Roth IRAs has gone up to $7,000 in 2024, with an unchanged catchup contribution limit of $1,000 for individuals aged 50 and older.

2. Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are a valuable tool for saving for medical expenses while enjoying tax advantages. In 2024, the annual contribution limit for individuals with self-only coverage under a High Deductible Health Plan (HDHP) is $4,150, up from $3,850 in the previous year. If you have family coverage, the contribution limit has increased to $8,300, a $550 increase from the previous limit of $7,750.

3. Flexible Spending Accounts (FSAs)

Flexible Spending Accounts (FSAs) allow you to set aside pre-tax dollars for eligible medical expenses. In 2024, the annual contribution limit for FSAs increases to $3,200. Keep in mind that not all employers offer the maximum limit, so it’s wise to check with your employer for specific details.

4. 529 College Savings Plans

529 College Savings Plans are designed for education expenses and offer tax-advantaged growth. These plans have lifetime, rather than annual, contribution limits. The limits are updated periodically and vary by state (e.g. $500,000 per beneficiary in Texas 529 plans but only $305,000 in New Jersey). Be sure to research your state’s specific limits and benefits for 529 plans.

5. Tax Implications

Understanding the tax implications of these contribution limits is crucial. These accounts may offer tax deductions on contributions, tax-free growth, or tax-free distributions (or all three, subject to certain conditions, as in the case of HSAs). It’s important to be aware that exceeding these limits can result in penalties or tax consequences, so staying within the prescribed limits is essential.

Conclusion Being informed about the annual contribution limits is a fundamental aspect of effective financial planning. These limits can significantly affect your ability to meet your financial goals, particularly in areas such as retirement and healthcare. As we prepare for 2024, consider adjusting your financial strategy to make the most of the increased contribution limits and secure a prosperous financial future. Don’t forget to seek guidance from your financial advisor for personalized advice for your unique situation.

Retirement Contribution Limits202220232024
401(k) and 403(b) Employee Contribution Limit$20,500$22,500$23,000
401(k)/403(b)/401(a) Catch Up Contribution Limit$6,500$7,500$7,500
401(k)/403(b)/401(a) Total Contribution Limit Age < 50$61,000$66,000$69,000
401(k)/403(b)/401(a) Total Contribution Limit Age 50+$67,500$73,500$76,500
Traditional and Roth IRA Contribution Limits$6,000$6,500$7,000
Traditional and Roth IRA Catch-Up Contribution$1,000$1,000$1,000
Roth MAGI Beginning Phaseout for Joint Filers$204,000$218,000$230,000
SEP-IRA Contribution Limits$61,000$66,000$69,000
SIMPLE IRA and SIMPLE 401(k) Contribution Limits$14,000$15,500$16,000
Health Savings Account (HSA) Contribution Limits$3,650$3,850$4,150
Health Savings Account (HSA) Family Contribution Limits$7,300$7,750$8,300
Flexible Savings Account (FSA) Contribution Limits$2,850$3,050$3,200
401(a) compensation limit$305,000$330,000$345,000
Defined Benefit Plan 415(b) limit$245,000$265,000$275,000
Highly-compensated employee$135,000$150,000$155,000

Sources:

1. https://www.whitecoatinvestor.com/retirement-plan-contribution-limits/

2. https://finance.yahoo.com/news/401-k-contribution-limits-projected-110000639.html

3. https://www.fool.com/the-ascent/buying-stocks/articles/5-ways-to-plan-ahead-if-retirement-contribution-limits-rise-in-2024/

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

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