2022 Contribution Limits

by | Dec 21, 2021 | Investing, Retirement Planning, Smart Financial Tips

If saving more is one of your resolutions for 2022, there is great news: you can put away more money toward your retirement accounts next year! The IRS recently announced inflation-adjusted figures for retirement plans for 2022, and the following changes will help you stuff these retirement savings accounts. If you make automatic payroll deferrals to your retirement accounts, you may need to notify your plan or payroll administrator to adjust your savings amount to reflect the higher limits.

  • 401(k) contribution limits have been increased for 2022. Make sure you increase your employee payroll deferrals so that your qualified plan retirement contributions are maxed out ‐ $20,500, or $27,000 if you are over age 50.[i]
  • The amount workers can contribute to individual retirement accounts (IRAs) and Roth IRAs remains unchanged in 2022 at $6,000. The catch-up contribution amount for those accounts will also stay at $1,000, meaning those 50 and over can put away $7,000 next year.i
  • The income ranges to be eligible to contribute to Roth IRAs increase next year. The new phase outs are:
    • between $129,000 and $144,000 for singles and heads of households (up from $125,000 to $140,000 in 2021), and
    • $204,000 to $214,000 for married couples filing jointly (up from $198,000 to $208,000 in 2021).i
  • For the self-employed and small business owners, the new amount you, as an employer, can contribute to a SEP-IRA is the lesser of 25% of the employee’s compensation or $61,000 in 2022 (up from contributions of the lesser of 25% of the employee’s compensation or $58,000 in 2021).[ii]
  • For the self-employed, the new amount you can save, as an employer and employee, in a solo 401(k) is $61,000 in 2022 (up from $58,000 in 2021). The solo 401(k) catch-up limit remains $6,500.[iii]
  • The amount individuals can contribute to a Savings Incentive Match Plan for Employees (SIMPLE) retirement account will also increase, from $13,500 (2021) to $14,000 (2022). The SIMPLE IRA catch-up limit is still $3,000. ii

Other Noteworthy Planning Items:

  • Health Savings Account (HSA) funding limits for 2022 have been bumped up to $3,650 for singles and $7,300 for family. Age 55 and older will get an additional $1,000 in this high-deductible health insurance plan.[iv]
  • You can put an extra $100 into your healthcare Flexible Spending Account (FSA) in 2022, as the annual contribution limit to pay for qualified out-of-pocket healthcare expenses rises to $2,850. The annual dependent care FSA maximum remains $5,000 for single filers and married filing jointly couples in 2022.iv
  • For the first time in several years, the annual exclusion from gift tax will increase from $15,000 to $16,000 per year per donee, starting on January 1, 2022. The official estate and gift tax exemption climbs to $12.06 million per individual for 2022 deaths, up from $11.7 million in 2021, according to new IRS inflation-adjusted numbers. The new figures essentially mean that wealthy taxpayers can transfer more to their heirs’ tax-free during life or at death.[v]
  • For 2022, you can a make a tax-free gift per beneficiary of $16,000 as an individual or $32,000 as a married couple for a 529 Savings Plan. Alternatively, you can front-load five years’ worth of tax-free gifts by contributing $80,000 as an individual or $160,000 as a married couple.[vi]
  • There is a large 5.9% Cost of Living Adjustment (COLA) coming to Social Security beneficiaries in 2022. The average monthly retirement benefit will go up by $92 per month.[vii] Be mindful that exactly how much more money beneficiaries will see depends on the amount of Medicare Part B premiums.
  • Medicare Part B premiums have increased 14.5% from 2021 to 2022, according to new IRS inflation-adjusted figures, with premiums for highest-income couples rising to nearly $14,000 per year.[viii]

[i] Irs.gov. 2021. IRS announces changes to retirement plans for 2022 | Internal Revenue Service. [online] Available at: <https://www.irs.gov/newsroom/irs-announces-changes-to-retirement-plans-for-2022> [Accessed 8 December 2021].

[ii] Irs.gov. 2021. How much can I contribute to my self employed SEP plan if I participate in my employers SIMPLE IRA plan | Internal Revenue Service. [online] Available at: <https://www.irs.gov/retirement-plans/how-much-can-i-contribute-to-my-self-employed-sep-plan-if-i-participate-in-my-employers-simple-ira-plan> [Accessed 8 December 2021].

[iii] Irs.gov. 2021. One Participant 401k Plans | Internal Revenue Service. [online] Available at: <https://www.irs.gov/retirement-plans/one-participant-401k-plans> [Accessed 8 December 2021].

[iv] Miller, S., 2021. 2022 Benefit Plan Limits & Thresholds Chart. [online] SHRM. Available at: <https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-benefits-contributions-limits-chart-2022.aspx> [Accessed 8 December 2021].

[v] Irs.gov. 2021. What’s New – Estate and Gift Tax | Internal Revenue Service. [online] Available at: <https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax> [Accessed 8 December 2021].

[vi] Sloane, L., 2021. The Gift-Tax Benefits of ‘529’ Plans. [online] WSJ. Available at: <https://www.wsj.com/articles/gift-tax-benefits-of-529-plans-11638391861> [Accessed 8 December 2021].

[vii] Konish, L., 2021. [online] Available at: <https://www.cnbc.com/2021/10/22/how-to-estimate-your-monthly-social-security-benefit-increase-for-2022.html> [Accessed 8 December 2021].

[viii] Stewart, J., 2021. [online] Kiplinger.com. Available at: <https://www.kiplinger.com/retirement/medicare/603759/medicare-part-b-premium-jumps-dramatically-for-2022> [Accessed 8 December 2021].

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