401k And Retirement Plan Limits For The Tax Year 2022
The Internal Revenue Service (IRS) has released the 401k and retirement plan limits for the tax year 2022. The limits are based on the amount of money you can contribute to your 401k or similar retirement plans. The IRS adjusts the limits annually to keep up with inflation and changes in the economy. Here's what you need to know about the 2022 retirement plan limits.
401k Contribution Limits
The IRS has set the maximum annual contribution limit for 401k plans at $19,500 for 2022. This is an increase of $500 from 2021. If you are age 50 or older, you can also make an additional catch-up contribution of $6,500, for a total annual contribution of $26,000. The IRS also allows employers to set their own limits when it comes to employer matching contributions.
Traditional IRAs
The maximum annual contribution limit for traditional individual retirement accounts (IRAs) is $6,000 for 2022. This is an increase of $500 from 2021. If you are age 50 or older, you can make an additional catch-up contribution of $1,000, for a total annual contribution of $7,000. The maximum income limit for making traditional IRA contributions also increased to $66,000 for individuals and $105,000 for married couples.
Roth IRAs
The maximum annual contribution limit for Roth IRAs is $6,000 for 2022, with a $1,000 catch-up contribution for those age 50 or older. The maximum income limit for making Roth IRA contributions is $125,000 for individuals and $198,000 for married couples.
SEP IRAs
The maximum annual contribution limit for SEP IRAs is $58,000 for 2022, with a $6,500 catch-up contribution for those age 50 or older. The maximum income limit for making SEP IRA contributions is $375,000 for individuals and $450,000 for married couples.
SIMPLE IRAs
The maximum annual contribution limit for SIMPLE IRAs is $13,500 for 2022, with a $3,000 catch-up contribution for those age 50 or older. The maximum income limit for making SIMPLE IRA contributions is $142,000 for individuals and $198,000 for married couples.
Defined Benefit Plans
The maximum annual benefit limit for defined benefit plans is $230,000 for 2022, with a $6,500 catch-up contribution for those age 50 or older. The maximum income limit for defined benefit plans is $375,000 for individuals and $450,000 for married couples.
Tax Advantages of Retirement Plans
Retirement plans offer many tax advantages, such as tax-deferred growth on contributions and earnings, tax credits for contributions and tax-free growth on withdrawals. Contributing to a retirement plan can also help reduce the amount of taxes you owe each year. For example, if you make a $5,000 contribution to a 401k plan, you can reduce your taxable income by $5,000.
Conclusion
The IRS has set the maximum annual contribution limits for 401k and similar retirement plans for the tax year 2022. Contributing to a retirement plan can help you save for the future and reduce your taxes. Be sure to check with your employer to find out what retirement plan options are available to you.