As we kick off a new year, it’s a great time to take a fresh look at your savings strategies. The IRS has announced increased contribution limits for several key accounts that could help you save more in 2025—whether you’re putting money toward retirement, healthcare expenses, or general savings. These adjustments are a welcome opportunity to optimize your financial situation and take advantage of tax-deferred or tax-free growth. Let’s walk through an overview of the updated limits and how they may impact your savings for the year ahead.
New TSP Contribution Limit: $23,500 (Up $500 from 2024)
The Thrift Savings Plan (TSP) remains one of the best retirement savings vehicles for Feds, allowing you to save for retirement on a tax-deferred (Traditional) or tax-advantaged (Roth) basis. In 2025, the IRS has increased the annual contribution limit for the TSP to $23,500—up $500 from the 2024 limit.
This increase gives you a little more room to contribute to your retirement savings, which can be particularly helpful if you’re looking to maximize your savings ahead of retirement. Whether you’re just starting to build your TSP or are already in the accumulation phase, taking advantage of the higher limit can help you boost your retirement nest egg.
Depending on your strategy, you can choose to contribute to either Traditional or Roth. If you’re unsure about how to allocate between Traditional and Roth TSP contributions, it’s a good idea to schedule a financial consultation and talk with a professional to determine the best approach for your unique situation.
New HSA Contribution Limits: $4,300 IND / $8,550 FAM (Up $150 / $200 from 2024)
The Health Savings Account (HSA) is another powerful tool for federal employees, especially those enrolled in a High Deductible Health Plan (HDHP) through the Federal Employees Health Benefits (FEHB) program. In 2025, the IRS has increased the HSA contribution limit to $4,300 for individuals and $8,550 for families—up $150 and $200, respectively, from the 2024 limits.
HSAs offer a triple tax advantage: contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free. But keep in mind that in order to contribute to an HSA, you must be enrolled in an HSA-compatible FEHB plan. If you're considering opening or maximizing your HSA contributions this year, ensure that your health plan qualifies to avoid any complications.
Contributing the maximum allowed can help you build a significant medical expense reserve for the future, and it can also help reduce your taxable income. For those approaching retirement, an HSA can be a key part of your strategy to cover future healthcare costs, which are expected to rise significantly in retirement. Lastly, since HSAs allow for unlimited carry over of funds from year to year, they can also serve as an effective investment vehicle, growing your savings over time.
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New FSA Contribution Limit: $3,300 (Up $100 from 2024)
The Flexible Spending Account (FSA) is another savings tool that can help reduce your taxable income while saving for medical, dependent care, and other eligible expenses. In 2025, the FSA contribution limit has increased to $3,300—up $100 from 2024.
This increase means you can set aside more of your pre-tax earnings for eligible expenses throughout the year, which can help you manage out-of-pocket healthcare costs or dependent care expenses. Keep in mind that FSAs are “use-it-or-lose-it” accounts, meaning the funds you contribute must be spent by the end of the year (or during the grace period, depending on your plan). This makes it important to carefully estimate your expected expenses so you don’t over- or under-contribute.
Action Steps: Try to Maximize Your 2025 Savings
With these updated contribution limits, now is the time to review your savings strategies and make sure you’re contributing to these key accounts in 2025. Whether you want to take advantage of the higher TSP limit to accelerate your retirement savings or maximize your HSA or FSA contributions for medical expenses, making strategic decisions now can pay off later.
At Serving Those Who Serve, we specialize in helping federal employees make the most of their financial opportunities. If you have questions about how to adjust your contribution strategy or if you need guidance on how these accounts fit into your overall retirement plan, we’re here to help.
Feel free to reach out for a complimentary 1-on-1 financial planning consultation. Our team can help you navigate the complexities of federal employee benefits and ensure that you’re making the best decisions for your financial future.
Let us help you maximize your savings this year and beyond. Contact us today to get started!
**Written by Katelyn Murray, CFP®, ChFEBC®, FBS®, CFT-1™, ECA. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Katelyn Murray and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
