The IRS annually adjusts the amount employees are allowed to save in retirement accounts.  Because the adjustment is tied to the Cost of Living Adjustment (and the cost of living has definitely risen with this year’s inflation), typically the amount goes up or stays the same when reviewed.  This could be a good time to think about upping your contribution next year as you budget for 2022.

The IRS recently issued its 2022 Limitations Adjusted as Provided in Section 415(d), etc., which is linked here.  This year, the annual contribution limits to different types of retirement accounts did as expected – rose or stayed the same.  Here are some of the highlights:

  • For employees saving through salary deferral in 401(k), 403(b), and most 457 plans (defined contribution plans) the 2022 savings limit increased to $20,500 from $19,500 with those age 50 and older allowed make an additional $6,500 catch-up contribution. The catch-up contribution limit was unchanged for 2022.  So, if you are under age 50, you can save up to $20,500.  If you are 50 or older, you can save up to $27,000.
  • If your defined contribution plan has a matching or profit sharing component, the maximum amount that can be contributed in 2022 rose to $61,000 from $58,000 with those age 50 and older allowed make an additional $6,500 catch-up contribution. The IRS calculates this maximum by totaling your savings with the contributions put into your account by your employer, which, together, we call all sources.  So, if you are under age 50, the maximum contribution from all sources is $61,000.  If you are 50 or older, the maximum from all sources is $67,500.
  • For SIMPLE Plans, the 2022 savings limit increased to $14,000 from $13,500 with those age 50 and older allowed make an additional $3,000 catch-up contribution. The catch-up contribution limit was unchanged for 2022.  So, if you are under age 50, you can save up to $14,000.  If you are 50 or older, you can save up to $17,000.
  • For IRAs, the 2022 savings limits remained unchanged at $6,000 with those age 50 and older allowed make an additional $1,000 catch-up contribution. The catch-up contribution limit was unchanged for 2022.  So, if you are under age 50, you can save up to $6,000.  If you are 50 or older, you can save up to $7,000.

These are just some of the highlights of the 2022 changes.  I highly recommend you consult your tax professional to make sure you take advantage of these increases to the extent possible from a tax standpoint.  I would also advise talking to your investment advisor to see how you might take advantage of the new maximums through your available retirement savings accounts.

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