The start of a new year is a time to re-examine how much you are saving for long-term expenses such as retirement and health costs. There is good news for savers: New 2013 federal rules allow you to save more.
In 2012, ambitious savers younger than 50 could only stash $17,000 in their 401(k) or 403(b) retirement accounts. This year, the Internal Revenue Service is allowing individuals to save an extra $500 toward retirement. The "catch-up" contribution limit for people older than 50 remains the same.
Likewise, eligible savers in 2012 could only put $5,000 per year in their individual retirement accounts, or IRAs. This year, eligible savers can increase contributions by an extra $500 per year. Again, the "catch-up" contribution limit for people older than 50 remains unchanged.
Do you have a health insurance plan that is compatible with a health savings account, or HSA? Last year, individuals could save $3,100 in their HSA, and families could save a combined $6,250. This year, however, that amount increases by $150 for individuals and $200 for families.
If your health insurance is compatible with a flexible savings account, or FSA, you can contribute up to $2,500 in 2013. But unlike the other changes mentioned in this post, that limit is actually much lower than in 2012. Federal health care reform now caps the amount you can save in your FSA at the $2,500 level. However, your employer is eligible to make additional contributions to your account.
How can I start saving?
The best way to hit these new contribution limits is to adjust your monthly contributions. Even a small change -- $5 to $10 extra per week -- will add up to hundreds of dollars over the span of a year.
Don't sweat if you can't afford to maximize the annual contributions. Plenty of people, myself included, have never maximized the annual 401(k) contribution limit. Focus on saving as much as you can.
Find a savings rate that works for you. Figure out the maximum amount that you can comfortably save. Then, increase your contribution until you are just outside your comfort zone. That last little bit will add up once it is time for retirement.
Paula Pant blogs at AffordAnything.com about creating wealth and living life on your own terms. She's traveled to nearly 30 countries, owns five rental units and works for herself. Follow Paula on Twitter @AffordAnything.