Limits on Retirement Savings Contributions Increased Through 2022

Last Updated on 6th July 2022 by Jeffrey Camerda

The Internal Revenue Service (IRS) wants to increase Qualified Retirement Plan (QRP) contribution limits by $1,000 from $19,500 in 2022 to $20,500 for 401(k) plans, 403(b)s, and most 457 plans.

Individual Retirement Account (IRA) contribution limits, on the other hand, will stay unchanged at $6,000 for both traditional and Roth IRAs. As a result of these changes, the income thresholds for Roth IRAs and the conditions for claiming the saver’s credit on traditional IRA contributions have been increased for 2022.

IMPORTANT THINGS TO NOTE

  • A yearly review and revision of the contribution limitations for eligible retirement accounts is carried out by the IRS.
  • Inflation-based tax adjustments are made by the Internal Revenue Service (IRS).
  • In October, just before the start of a new year, most increases are announced.
  • There will be a $1,000 increase in contribution limits for 401(k), 403(b), 403(b), most 457 plans, thrift savings plans (TSPs), and other qualifying retirement plans in 2022.
  • If you are above the age of 50, you may contribute an extra $1,000 to your regular IRA or Roth IRA each year in 2022.

Employer Retirement Programs that are tax-advantaged

A $1,000 increase in TSP and 457 contributions for the year 2022 has been announced:

  • The amount of money you may set aside for 2021 is $19,500.
  • The amount of money you may set aside for 2022 is $20,500.

Contributions to a Traditional IRA: You Can Make More Money and Still Deduct It

Contributions to a traditional IRA are generally tax deductible in the year in which they are made. Contributions to a workplace retirement plan, on the other hand, may not be tax deductible if you or your spouse (if you file jointly) are covered by the plan, depending on your income.

This is excellent news because for the year 2022, the amount of money you may make and still claim a tax deduction has increased. New phaseout ranges have been established and they are;

  • The phaseout range for single taxpayers who participate in a corporate retirement plan has increased from $66,000 to $76,000 to $68,000.
  • For married couples filing jointly, the phaseout range is now $109,000 to $129,000, up from $105,000 to $125,000, if the spouse making the IRA contribution is covered by an employment retirement plan.
  • It’s no longer possible to deduct contributions to an IRA from a spouse’s income of $198,000 to $208,000 if the spouse is not covered by an employment retirement plan.

Roth IRAs Are Now More Accessible to a Wider Range of Taxpayers

Saving in a Roth IRA rather than a standard IRA has a number of advantages, not the least of which is the fact that payments at retirement are tax-free and there are no Required minimum distributions (RMDs). There are, however, income restrictions on who is eligible for a Roth account. For 2022, they’ve been eased even more.

According to the Internal Revenue Service (IRS), this is how it works:

“There is an increase to $129,000-$144,000 in the income phase-out range for taxpayers making Roth IRA contributions, from $125,000-$140,000 before. The phase-out range for married couples filing jointly has been raised from $198,000 to $208,000 to $204,000 to $214,000, up from there. Individuals who contribute to a Roth IRA and are married but file a separate tax return are not subject to an annual cost-of-living adjustment in the phase-out range of $0 to $10,000.”

You may make more money and benefit from the saver’s credit at the same time

Traditional or Roth IRA contributions, employer-sponsored 401(k), 403(b), Simplified Employee Pension (SEP), or 457 plan contributions are eligible for the saver’s credit (also known as the retirement savings contributions credit), which is available to low- and moderate-income employees.

According to the IRS, the following has changed: In 2022, married couples filing jointly will be able to claim a tax credit of $68,000, while heads of household will be able to claim $51,000, and singles and married persons filing separately will be able to claim $34,000, all increases of $8,000 each.

More Changes to Qualified Retirement Plan

Compensation limitations or voluntary deferrals, important employees, highly paid employees, and any other retirement arrangements authorized by the Internal Revenue Code (IRC) may have altered. In Notice 2021-61, the IRS outlines these decisions. You should speak with a tax professional if you want further information.

Catch-up Contributions 

Increase your contributions if you are above the age of 50 to help you save as your retirement date approaches. For the year 2022, the amount of money you may save for retirement has not changed.

There is still time to contribute:

  • A regular or Roth IRA costs around $1,000 extra annually.
  • For a 401(k), 403(b), most 457 plans, and a TSP, $6,500 more is required.

Contribution limitations for retirement plans are established by whom and how?

For eligible retirement plans, the IRS establishes annual contribution limits. Inflation affects the cost of living each year, and the government takes this into account. Only a few times a year are limitations increased, and the announcement is typically made in October.

Is there a new restriction for 2022?

Yes, and no. The annual contribution limit for traditional and Roth IRAs is still $6,000, with a $1,000 catch-up contribution permitted. Employer-sponsored retirement plans, on the other hand, have had their contribution maximum boosted from $19,500 to $20,000.

How much credit does the saver have?

The saver’s credit, which is also known as the retirement savings contributions credit, is a tax break for those with modest or low incomes. Contributions to a qualified retirement plan are eligible for a $1,000 tax credit. Couples filing jointly will have an income cap of $68,000 in 2022, up from $66,000; singles and married persons filing separately will have an income cap of $34,000, up from $33,000; and heads of household will have an income cap of $51,000 in 2022, up from $42,500.

To Sum It Up;

In 2022, these changes are expected to assist taxpayers in saving even more for their golden years. Taxes due on or before April 18, 2022, will be subject to the restrictions in effect as of that year. It’s important to keep in mind, though, that you may contribute to your 2021 regular or Roth IRA as late as the April 15, 2022 tax deadline.

Jeffrey Camerda

Dr. Jeffery Camerda, PhD, is a financial planner who specializes in wealth management and retirement planning. With a PhD in Economics and Financial Planning, Jeffery represents the highest level of financial planning expertise and achievement in the USA In addition to preparing you for a career in financial planning, a PhD in economics and finance also prepares you for academic pursuits, such as becoming a university professor in teaching or doing research. Here at the Wealth Builder, our financial advisory company was founded in 2007 and services all across the USA with over 16 years of expertise. In order to provide the finest advice and services, we pay close attention to the specific financial circumstances and requirements of each client. In order to guarantee that our clients don't get a sales pitch for insurance or investments, as well as a lack of conflict of interest from a prospective commission-bearing corporations, Jeffery focuses on fee-based services. Financial planning for wealth managers, financial well-being workshops, and personal financial planning packages are all part of the company's offering. Jeffrey Camarda, PhD, CFA, EA is also the founder of the Family Wealth Education Institute, is a member of the Financial Planning Association and serves as the Chairman of Camarda Wealth Advisory Group

Click Here to Leave a Comment Below

Leave a Comment:

Thanks!

 

Get Your FREE Crypto and Precious Metals Investment Kit

 

©2010 - 2022 - All Rights Reserved.
Jeffery Camarada PhD CFP
The Wealth Builder Club
4600 Touchton Rd., Bldg. 100
Suite 150,
Jacksonville,
FL 32246
t: +1-800-262-1083
e: [email protected]