Cortburg Speaks Retirement

Retirement Contribution Limit Changes for 2022

March 02, 2022 Miguel Gonzalez, MBA, AIF®, CPFA®, CRC® Season 2022 Episode 73
Cortburg Speaks Retirement
Retirement Contribution Limit Changes for 2022
Show Notes Transcript

Cortburg Speaks Retirement - episode #73: Retirement Contribution Limit Changes for 2022 / Investment in Stock Market, Financial Planning, Retirement Planning, Money Management

On this week's podcast, Miguel Gonzalez discusses the retirement contribution limit changes for 2022.  

Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

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INTRODUCTION

Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.

 

HOST

Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

On this week’s audio podcast, we review the retirement contribution limit changes for 2022.

With inflation on the rise, the IRS increased the 2022 contribution limits for some retirement accounts. Although a 2021 Congressional report found that only about 8.5% of defined benefit plan participants and 4.7% of individual retirement account (IRA) holders max out their contributions each year, increasing the amount you put aside for retirement may help your financial independence.1 Here is what retirement savers need to know about the increases allowed in 2022.

Changes to 401(k) Limits

For 2022, the 401(k) limit for taxpayers under age 50 has increased by $1,000, to $20,500.2 Those age 50 and older may make another $6,500 "catch-up" contribution, for a total maximum contribution of $27,000. This contribution amount is individual, which means that a married couple may contribute a total of $41,000 to their 401(k)s plus $6,500 more for each person who is age 50 or older to a maximum of $54,000.1

Along with 401(k)s, this $20,500 contribution limit also applies to the 403(b), 457, and Thrift Savings plans available to government employees.

No Changes to IRA Limits

Though 401(k) limits increased, the IRS did not increase the contribution limits for traditional IRAs and Roth IRAs. These IRA limits remain the same, $6,000 for those age 49 and under and $7,000 for 50 and older.1

The deductibility of traditional IRA contributions depends on your household income, while your ability to contribute to a Roth IRA also depends on your income. And unlike the IRA contribution limits, these income thresholds have changed for 2022.

· For single taxpayers covered by a 401(k), 457, or another workplace retirement plan, a deduction of up to the $6,000 or $7,000 limit (age 50 or older) is available only if their 2022 income is under $68,000. Those earning between $68,000 and $78,000 may deduct a portion of the full IRA contribution. These income thresholds represent a $2,000 increase from 2021.1

· For married taxpayers filing jointly, who are both covered under a workplace retirement plan, the full IRA deduction is available if the total household income is under $109,000. Those earning between $109,000 and $129,000 may deduct a portion of the full IRA contribution, while those earning more than $129,000 cannot deduct any traditional IRA contributions.1

· For married taxpayers filing jointly, where a workplace retirement plan covers only one, both taxpayers may deduct the full IRA contribution if they earn less than $204,000 in 2022, with the phase-out allowing a partial deduction for earnings between $204,000 to $214,000.1

IRA contributors whose income exceeds these limits may still contribute to a traditional IRA—they just cannot deduct this contribution. But when it comes to Roth IRAs, those whose income exceeds the contribution thresholds are barred from directly contributing to a Roth.

· For single taxpayers or heads of household, the full Roth IRA contribution is available so long as their 2022 income is under $129,000.1

· For married couples who file jointly, the Roth IRA income threshold starts at $204,000; those whose income exceeds $214,000 cannot contribute any amount to their Roth. Married taxpayers whose household income is between $204,000 and $214,000 may contribute a lower amount to a Roth IRA.1

Because over-contributing to an IRA or Roth IRA carries some financial penalties, work with a financial professional to not exceed the maximum allowed. It is important to know these limits and how they increased for the 2022 tax year.

Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.  

 

DISCLOSURES  

Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision. 

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

CRC conferred by The International Foundation for Retirement Education.

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Private Advisor Group, LLC, a registered investment advisor.  

Private Advisor Group, LLC and Cortburg Retirement Advisors, Inc. are separate entities from LPL Financial.

Investing involves risk including possible loss of principal.

1 https://www.investopedia.com/2022-401k-limit-rises-5208542

2 https://www.fa-mag.com/news/irs-raises-401-k---roth-contribution-limits-64793.html

This material was created for educational and informational purposes only and is not intended as ERISA, tax, or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Investing involves risks including possible loss of principal.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.