As we enter into the 4th quarter of 2023, it’s time to start developing a financial plan and budget for 2024. The IRS increases contribution limits to retirement accounts every year to keep up with rising inflation and cost of living. Over the past couple of years, Americans have experienced record inflation and cost of living increases. As of November 1st, 2023, the IRS announced new retirement fund account contribution limits.
401 (k) Contribution Limits in 2024
Tradition 401 (k), Roth 401 (k), and similar accounts will allow individuals 49 years and younger to contribute $23,000 for 2024, which is a $500 increase from 2023. Individuals over the age of 50 can contribute an extra $7,500 which is a total of $30,500 for 2024.
Traditional and Roth IRA Contribution Limits in 2024
IRA contributions will increase to $7000 in 2024 up $500 from 2023 for individuals 49 and younger. Individuals 50 and older will be allowed to contribute an extra $1,000 for a total of $8,000 in 2024.
SIMPLE 401 (k) and IRA Contribution Limits in 2024
Simple 401 (K) and IRA contributions will increase to $16,000 for individuals 49 and younger in 2024 and this is up $500 from 2023. Individuals 50 and older can contribute an extra $3,500 for a total of $19,500 in 2024.
HSA Contribution Limits for 2024
HSA contributions will increase to $4,150 for individual coverage and $8,300 for family coverage. This is an increase of $300 from 2023. Individuals 50 and older can contribute an extra $1,000 as a catch-up contribution.
Why You Should Know Your Contribution Limits
Knowing your contribution limits ahead of 2024 will allow you to adjust your budgets so you can take advantage of the larger contribution limits in order to get the maximum amount of tax savings and take advantage of employer matching. Even if you’re not able to max out your contributions to your retirement accounts, it’s good practice to increase your contributions year after year so you can stay on track of your retirement goals. Starting from zero with a current contribution limit of $7,000 per year, if you can max out your IRA annually assuming an average return rate of 8%, in 35 years your IRA will be worth $1,206,217.63.
So how can you trim your spending to increase your savings? Review what you’ve spent on food, entertainment, and travel in 2023. Here at Money Mindset, we’re all about making smarter choices on the road to financial freedom, not deprivation. Think of ways you can decrease spending without sacrificing enjoyment. If you ate out an average of twice per week, trim that to once per week. If you want to continue to eat out twice per week aim to select cheaper options that can save you $10-$30 per meal. Also, consider picking up takeout (please no delivery services as they charge extra fees!) and BYOB at home or even better enjoying your meal as a picnic in the park. Look at fitness for more entertainment options as many studios/gyms will do events (often free). Many yoga studios offer donation-based classes that will allow you to choose how much you want to donate allowing you to pick a price that meets your budget. Running and cycling clubs will often do rides/meetups and host events. As for travel look for off-season deals and consider road trips. Hotels and airfare have increased substantially in 2023 and the trend will likely continue in 2024. CM.
