The Limits Keep Rising: Tax-Sheltered Accounts and My Wallet’s Existential Crisis | brokeGIRLrich
Every year, like clockwork, financial planners across the land cheer as the IRS announces higher contribution limits for tax-advantaged accounts like HSAs, IRAs, and 401(k)s. It’s a big win, they say—a chance to squirrel away even more for our golden years while avoiding Uncle Sam’s grasp in the present. And yet, while those planners are popping champagne, my wallet is in the corner clutching its pearls.
Yes, it’s great that we can save more for retirement or medical expenses, but let’s be honest: maxing out these limits is starting to feel like an Olympic event—and I didn’t train for this.
I just transferred over a bit of savings I have after paying my last tuition fees and added a whopping $1300 to my HSA, bringing the current grand total for retirement savings this year to $1450.
Don’t get me wrong, the logic here is sound. By increasing contribution limits, the government is trying to keep pace with inflation and give savers more opportunities to grow their wealth in accounts that are shielded from taxes. HSAs are like magical unicorns that cover your medical expenses tax-free, IRAs let your investments grow tax-deferred (or tax-free with a Roth), and 401(k)s? Well, they’re the corporate workhorse of retirement savings.
This year, the limits are higher than ever:
- 401(k): $23,000 for people under 50, $30,500 if you’re 50 or older.
- IRA: $7,000 for under 50, $8,000 for over 50.
- HSA: $4,150 for singles, $8,300 for families.
That’s a grand total of $35,150 in potential savings if you’re under 50 and contributing to all three. And if you’re over 50? You get bonus catch-up contributions because apparently, age comes with urgency.
These limits are aspirational—like those workout goals I set every January. Sure, I could max out all these accounts, but that would mean drastically cutting back on little luxuries like, oh, rent and groceries these days.
Some years I think, “This is the year I’m going to crush my savings goals!” Then life happens. I decide to do something insane like go back to school in my late 30s. The car develops a mysterious rattle that mechanics assure me will cost just shy of a kidney to fix. And let’s not forget that occasionally, I like to grab a takeaway or buy a new candle.
Honestly, I’m trying. But every time I glance at the shiny new limits, I feel like I’m showing up to a marathon with the wrong shoes and no training.
“Max out your HSA first, it’s a triple tax advantage!” they say. Okay, but first let me see how much is left after the run in with urgent care to sort out a rash.
“Don’t forget to contribute the IRA maximum!”
“Make sure you’re saving for a rainy day!” Uh… I’m just trying to save for this day.
Here’s the thing: increasing contribution limits is objectively a good thing. It’s an opportunity to save more if you have the means, and it offers flexibility for high earners or those in a good financial position. If you’ve been around the blog for years, you know that there were plenty of times in my early 30s where I did manage these crazy numbers. These days… not so much. It’s a gentle nudge (or, let’s be real, a shove) to prioritize saving, even if we can’t hit those lofty caps.
I remind myself that saving something is better than saving nothing. Maybe I can’t hit $7000 in my IRA this year, and the 401(k) is a total pipe dream, but every dollar I do stash away is another dollar working for my future self. And who knows? Maybe Future Me will be so impressed by my efforts that she’ll spring for some fancy candles.
So, here’s to the rising contribution limits and the savers who can actually max them out. For the rest of us, let’s embrace the slow climb. Maybe we’ll never be Olympic savers, but we can still aim for financial wellness in our own messy, budget-conscious way.
And if I ever do manage to max out all three accounts? You’ll find me at the finish line with a celebratory donut, because Future Me would want me to enjoy the journey too.
When you add that up–that is a crazy amount of money to put away for many young people!! (Or just people with normal jobs)
Most of the doctor personal finance bloggers recommend saving 20% of your income for retirement. If you make $160K or more a year, which is not crazy-talk for a physician who has completed training, then maxing out all those accounts is reasonable.
If you make $30K, or even $60K, this is not a practical goal.
For me, since finishing training, I first worked on maxing out my 403 (b) (basically my 401(k)). This is painless for me, as it gets taken out before I see any money. It also helps with tax deductions. Next is the (backdoor) Roth IRA for me, and later, my spouse. I don’t do an HSA (for reasons that you inspired me to write about, but which post I still haven’t finished months later), so putting money in an FSA is more a matter of figuring out what I’ll have to pay in the coming year. That is a total crapshoot and I am usually wrong.
I may be cutting back soon at work, which means I may have to figure out whether I can afford to max out all three retirement accounts on a lower salary.
Yes, it’s really kind of concerning the way retirement has fully been pushed onto the individual at these lower income levels and the way that, as a society, we plan for the future is by suggesting we make these investments, but that’s really untenable for lower income folks in so many ways. I can only imagine this will implode on us over the next 40 years or so. Which I say from a privileged perspective as someone who largely has managed to mostly keep up with retirement contributions during my career – but that was heavily influenced by my ability to live with my parents for so long, which was really only achievable because of a career that had like 80-90% travel per year for so long.
It’s a complicated problem for a lot of people who aren’t high earners – which is really most of the population.
I’m looking forward to your post of FSA’s choosing to not do an HSA!