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What Is Max Roth IRA Contribution For 2022

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 6 minute read

From 2021 to 2022, Congress increased contribution limitations for certain retirement plans while leaving others untouched.

Congress did not increase IRA contributions despite widespread pandemic inflation.
Nonetheless, taxpayers did gain some little ground for other kinds of accounts. Consider these limitations when you map out your retirement funds for 2022.

Contributions to Retirement Accounts in 2022

Fewer than two types of retirement accounts are used by the average American. Check the terms and conditions of the accounts you intend to use for yourself.

Traditional 401(k)

  • Contribution Limit: $20,500
  • Catch-Up Contribution Limit (50+): $6,500 (total of $27,000)

In 2022, workers who participate in a 401(k) at work will be able to put away $20,500, an increase of $1,000 from the $19,500 limit in 2021. The additional $6,500 catch-up contribution for workers over the age of 50 continues at $6,500 in 2021.

The maximum amount that may be contributed to an employee’s 401(k) account by their employer is $61,000 ($67,500 for employees 50 and older). However, if your salary is less than the maximum, you cannot donate any more.

Keep in mind that there are restrictions based on income, albeit they are not as severe as with IRAs. Instead, these caps will be determined by how your salary stacks up against that of your coworkers. Workers are divided into two categories by the Internal Revenue Service: highly paid workers (HCEs) and those who are not. When you’re an HCE, figuring out how much you can put into your 401(k) is more challenging than for other workers.

Roth 401(k)

  • You may only put in $20,500.
  • When you reach age 50, you can start making catch-up contributions of $6,500 ($27,000 total).

Both standard and Roth 401(k) plans exist, similar to IRAs (k). You can’t put more than $20,500 (or $27,000) into each sort of account in a given year. If you are on the fence about which 401(k) to put your money into, put money into both of them.

Traditional Individual Retirement Account

  • ​​$6,000 contribution limit
  • Contribution Cap (Age 50+): $1,000 ($7,000 total).

In 2022, the IRA contribution maximum remained at $6,000 ($7,000 for those 50 and over) or your total income, whichever was lower. However, if one spouse did not work but the other did, the nonworking spouse might make contributions to a “spousal IRA.”

However, there are restrictions on how much money may be put into an IRA. If a single American’s modified adjusted gross income (MAGI) is less than $68,000, the deduction for the pretax portion of their contribution is unlimited. The deduction begins to phase off, however, between MAGI levels of $68,000 and $78,000. If your Modified Adjusted Gross Income is more than $78,000, you can still make contributions to a regular IRA, but you won’t be able to take a tax break for doing so.

With a MAGI of up to $109,000, joint filers can deduct 100% of their contribution. Once your income is between $110,000 and $129,000, the deduction begins to decline gradually until it is eliminated. The SECURE Act ensures that Congress will not restrict participation because of age.

Roth IRA

  • ​​$6,000 contribution limit
  • Contribution Cap (Age 50+): $1,000 ($7,000 total).

Both regular and Roth IRA contributions are subject to the same annual maximum.
Roth IRA contribution limitations, however, are not uniform. If a single person’s modified adjusted gross income (MAGI) is less than $129,000, they can contribute the entire amount. 

If your annual income is more than the limit, your Roth IRA contributions will be disallowed.
Starting at $204,000, the income phase-out threshold for joint filers increases to $214,000 each year. When it comes to a Roth IRA, there are no age restrictions on making contributions and no RMDs to worry about.

SEP IRA

  • Maximum Contribution: $61,000 or 25% of taxable income

Simplified Employee Pension Individual Retirement Accounts (SEP IRAs) are similar to 401(k) plans in that both the business and its owners can contribute up to $61,000 each year (k). That is an increase from the projected $58,000 for the year 2021.

Those above the age of 50 are left out of the SEP IRA’s increased catch-up contribution.
Despite the large maximum, contributions are limited to no more than 25% of self-employment income. Therefore, if you have a high savings rate and early retirement as an objective, you cannot put sixty percent of your income into a SEP IRA.

In theory, if you fulfill the requirements for both types of IRAs, you can contribute to both a SEP IRA and a Roth IRA.

SIMPLE IRA

The limit for contributions by small company owners and their workers will increase to $14,000 in 2022 from $13,500 in 2021. Workers over the age of 50 are eligible to make a $17,000 annual contribution.

Assuming you qualify, you can put money into a SIMPLE IRA as well as a regular or Roth IRA. For SIMPLE IRAs, a Roth option is not available.

SIMPLE IRAs (short for Savings Incentive Match Plan for Employees) are employer-sponsored retirement plans created as an alternative to 401(k) plans for small firms, despite being a form of Individual Retirement Account (IRA). In order to be affordable for entrepreneurs running smaller operations, they include less bureaucratic hassles and expenditures.

457 Plan

The 457 plans available to government employees are quite similar to 401(k) plans, including the fact that both share the same maximum annual contribution.

If you’re a worker and you’re within three years of the plan’s “normal retirement age,” you can save twice as much each year for the last three years, but only if you haven’t already contributed the maximum allowed. So, assuming you meet the requirements, you can put in a maximum of $41,000 in 2022. Workers over 50 who are eligible can select between the three-year option and the 50+ catch-up contribution.

Thrift Savings Plan

  • Contribution Limit: $20,500
  • Catch-Up Contribution Limit (50+): $6,500 (total of $27,000)

The Thrift Savings Plan (TSP), the federal government’s version of a 401(k), has the same restrictions on annual contributions as the 401(k) that the military uses. Contributions to retirement accounts for active-duty military troops serving in a conflict zone are capped annually at $61,000.

A Roth option is available in the TSP, just like in 401(k)s, so that your investments can grow tax-free.

Health Savings Account

  • Contribution limits: $3,650 for individuals and $7,300 for families.
  • $1,000 catch-up contribution limit (age 55+)

The maximum amounts that may be contributed annually to an individual and family Health Savings Accounts was increased by $50 and $100, respectively.

Despite the fact that health savings accounts (HSAs) aren’t officially retirement funds, many employees see them as such due to the numerous tax advantages and adaptability they provide.

A health savings account (HSA) is a tax-advantaged savings account that helps people with high-deductible health insurance pay for unexpected medical expenses. Due of the high cost of medical expenses incurred in the case of an unexpected emergency, the government permits you to make annual tax-free contributions to an HSA.

The clincher is that Every dollar you take from your HSA to pay for eligible medical expenditures is exempt from federal income tax, and both your contributions and earnings are protected from taxation. You may reduce your taxable income by making contributions, and then you won’t have to pay taxes on any money you take out.

That’s why HSAs are the most advantageous type of tax-free savings account available in the United States. After all, you anticipate incurring significant medical costs after you enter retirement. Please take note that the catch-up age begins at 55, not 50.

Flexible Savings Account

While HSAs can accumulate funds from year to year, flexible savings accounts, which are sponsored by employers, do not always do so. Late in 2021, Congress approved a measure allowing employees to carry over their 401(k) contributions into 2022 (with an opt-in requirement for employers).

If you aren’t sure what an FSA is or how it differs from an HSA, do some research; also keep in mind that FSA funds can only be used for certain medical costs.

Bottom Line

The sooner you amass money, the less of it the government can take from you in taxes. And in this day of declining pension plans and Social Security payments, you’re on your own to put money down for old age.

If you want to save and invest money without paying taxes, you should use tax-advantaged accounts. Employer matching contributions, if available, should be your first consideration because they are essentially free money. If you don’t already have a Roth IRA, you should think about getting one.

It is possible to reduce tax losses even for people who want to retire early by using tax-sheltered accounts. Invest wisely so as to get the most out of your money while paying the least amount of tax possible, and your wealth and passive income will grow on their own.

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