New Contribution Limits for 2023
Your group benefits plan offers you a number of opportunities to save money while reducing your potential tax liability. You’re free to use these benefits to the extent that you wish, but failing to take full advantage of them would be like leaving money on the table. So when contribution limits are raised, increasing your own savings rate is a wise move to make.
For 2023, the new contribution limits are as follows…
Health savings accounts. In 2023, you can contribute $3,850 to your health savings account if you’re an individual, or $7,750 if you maintain family healthcare coverage. The point of your HSA is that it allows you to set aside pre-tax dollars to be used toward out-of-pocket healthcare expenses like your deductible, co-payments, the cost of medication, and so on. Since your annual taxable income is reduced by the amount of your contribution, you can also save a bit on your income taxes, too.
Even better, any money left over in your HSA at the end of the year will be rolled over to future years. In fact, you can even keep the money in your account until you retire, and then use it on qualified medical expenses that aren’t covered by Medicare. So not only can your HSA save you money now; it can serve as an extra retirement savings vehicle if you choose to use it that way.
Flexible spending accounts. The new contribution limit for flexible spending accounts is $3,050 in 2023. This is the amount that you can contribute to the account on a pre-tax basis. You can then use the funds to pay for uncovered medical expenses like medications, co-payments, and more.
Retirement plans. And finally, it’s always a good idea to max out your retirement plan contributions. You can reap your full company match (if one is offered) and reduce your taxable income by the amount you contribute. For 2023, the contribution limits for 401k, 403b, Thrift Savings Plans, and most 457 plans will be $22,500. You can make an additional catch-up contribution of $7,500 if you’re age 50 or older.
If you have an Individual Retirement Account (IRA) the new contribution limit is $7,500 with a $1,000 catch-up contribution.
Talk to your employer for more information about your group benefits, or give us a call and we’ll be happy to answer your questions.