The tax code is not exactly “bedtime reading” 🙂 I read an article this week on https://financebuzz.com/irs-retirement-changes?pid=1692 I’m sharing with my own information added!
Want you to have a heads up to the 2022 IRS changes impacting retirement accounts. As you save for retirement, take note of the following changes.
1. Maximum contributions are higher
Many employers offer a retirement plan to their employees, usually a 401(k), 403(b), or 457 plan. The maximum you can invest in these plans is $20,500 in 2022, up $1,000 from 2021.
If this is news to you reach out to your financial advisor and/or your HR department. This is great time to plan how you can bump up your contributions to reach the full $20,500 maximum.
P.S.: If you cannot contribute the maximum to your plan, try to contribute as much as possible to take advantage of a company match, if your employer offers this.
2. Traditional IRA deduction phase-out ranges are higher
Many deductions and credits that the IRS offers are subject to “phase-out ranges”. This means that once your income crosses a specific threshold, the value of the deduction or credit you are eligible for slowly diminishes until it disappears altogether.
The phase-outs for deductions of traditional IRA contributions have changed in 2022. The phase-out ranges in 2022 are $68,000 to $78,000 for single savers who have a workplace retirement plan. The ranges are $109,000 to $129,000 for married couples filing jointly for the spouse who has a workplace retirement plan and makes an IRA contribution.
Typically, taxpayers can deduct the full $6,000 that they are allowed to contribute to a traditional IRA in 2022, but these phase-out ranges may change that amount for some people. Check the IRS website for more details, and remember to factor in these ranges before deciding how much to contribute to a traditional IRA this year.
3. Roth IRA contribution phase-out ranges are higher
If your income is higher, you might be restricted from making a full contribution to your Roth IRA. Fortunately, the phase-out ranges for Roth IRA contributions are higher in 2022. The phase-out ranges are $125,000 to $140,000 for single savers and $204,000 to $214,000 for married couples filing jointly.
So, if your income falls into those ranges, you will only be able to contribute a reduced amount of retirement savings to your Roth IRA, not the $6,000 that other taxpayers are allowed to contribute. Once your income exceeds the amounts above, you will not be eligible to make any type of Roth IRA contribution in 2022.
4. HSA contributions are higher
Technically, a health savings account is not a retirement plan. Instead, it is a place where savers of all ages can contribute tax-advantaged savings that can be withdrawn tax-free to pay for medical expenses.
However, many people use these accounts to sock away as much money as they can so that they will have a pool of funds to tap for health care costs after they retire.
The good news is that the contribution limits to HSA plans have increased in 2022. This year, you can contribute an extra $50 — for a total of $3,650 — if you have self-only medical coverage. If you have family coverage, you can contribute an extra $100, bringing the total to $7,300.
Remember that you must have a high-deductible health plan to be eligible to contribute to an HSA.
5. SIMPLE IRA contributions are higher
A SIMPLE IRA — short for “Savings Incentive Match Plan for Employees” — is a type of retirement plan often used by small businesses with fewer than 100 employees. Workers can contribute to these plans and build retirement savings. The employer also must make a contribution to worker accounts.
Many small businesses use a SIMPLE IRA because they are less costly to maintain than a traditional retirement plan. For 2022, the amount you can contribute to a SIMPLE IRA is $14,000, up from $13,500 in 2021.
Keeping up with everything
There is so much going on. It’s not always easy to keep on top of things that impact you. This applies for all of us.
This is the stuff my inquisitive side geeks out on 😉 Reach out anytime by email to let me know questions pertinent to you/yours: Lynn@thelivingplanner.com.
For a better understanding about me and what I do, my general website is: https://thelivingplanner.com and my online courses/resources will give you an idea of what I offer to assist people, pets and businesses. https://courses.thelivingplanner.com
Always remember what Eleanor Roosevelt said, “It takes as much energy to wish as it does to plan.” – Lynn
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