It's hard to believe it's almost 2022. Yet here we are. To help prepare for another year's decisions, and in particular our financial decisions, the IRS announced a few changes to the contribution limits for select retirement accounts, along with new income limits for eligibility of deductible contributions.
A few 2022 highlights
For employees participating in a 401k, 457, or 403b plan, the contribution limit has been raised to $20,500 for 2022, up from $19,500 in 2021.
The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000, up from $13,500.
SEP plans for self-employed individuals are limited to 25% of your net earnings from self-employment (not including contributions for yourself), up to $61,000 for 2022 ($58,000 for 2021; $57,000 for 2020).
Catchup contributions remain the same as well for those 50 and older. For a 401k, 457, and 403b plan it remains at $6,500, and the Simple IRA catchup remains at $3,000.
As for income limits to be eligible for a Roth IRA contribution they are as follows:
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000.
For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Taxpayers can deduct contributions to a traditional IRA when they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2022:
For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000.
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
All in all, these increases will help many who have a retirement plan through work. For those who are saving on their own, there isn't as much help since there's no increase in the Traditional and Roth IRA contribution limits. However, knowing your options and capitalizing on any opportunity you have is wise. If you need any help starting an account you can contact us here.