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Did you know you can sell all or a portion of a life insurance policy, even term insurance?
Every year, the IRS reviews, evaluates, and updates contribution limits for qualified retirement accounts based on factors such as cost of living. While some years see more changes than others, 2022 will have a few important updates—including an increase to the max 401(k) contribution in 2022. Here is a quick rundown of this year’s changes.
401(k) Contribution Limits in 2022
Will 401(k) contribution limits increase in 2022? Yes, they will. The major update with 401(k) plans is that the maximum contribution limit has increased to $20,500, up from $19,500 in 2021. This contribution limit also applies to 403(b) plans, most 457 plans, and the Thrift Savings Plan (TSP).
Those age 50 and older also have access to the ability to make catch-up contributions to their retirement plans. The catch-up amount for 2022 did not change, holding steady at $6,500. That means those taking advantage of the catch-up contribution for 401(k), 403(b), most 457 plans, and the TSP can contribute up to $27,000 beginning in 2022. It is important to note that anyone aged 50 or older can use the additional allowances granted by the catch-up; it is not limited to those individuals who feel they are “behind” in their retirement savings.
For those individuals using a SIMPLE retirement account, the contribution limit has increased to $14,000, up from $13,500 in 2021. However, the SIMPLE retirement catch-up amount will hold steady at $3,000, so the maximum amount that individuals age 50 and older can contribute to SIMPLE plans is $17,500 in 2022.
It is important to note that these contribution limits only apply to the savings an employee puts in their retirement accounts. The limit on the total amount an employer plus an employee can contribute to a plan is $61,000 in 2022, up from $58,000 in 2021—which is a fairly significant gain.
IRA Contribution Limits in 2022
What is the 2022 IRA contribution limit? As in 2021, the IRS did not change the overall contribution limit for IRAs, or individual retirement accounts. That amount remains steady at $6,000, and Roth IRA income limits in 2022 remain at $6,000 as well. There is also a catch-up contribution amount for IRAs, which is also not changing. That amount is $1,000. So, those age 50 and older may contribute up to $7,000 in their IRAs.
What did change with IRA limits? The eligibility requirements for tax-deductible IRA contributions have been slightly modified in 2022. As with years previously, if the taxpayer nor their spouse has access to a retirement plan through their employer, the total amount of their contribution is tax-deductible. However, if either the taxpayer or their spouse is covered by a plan through their employer, the amount that is tax-deductible varies based on the taxpayer’s filing status and their total income.
Here are the limits for traditional IRAs, per the IRS.
- For single taxpayers covered by a workplace retirement plan, the phase-out range is $68,000 to $78,000, up from $66,000 to $76,000 in 2021.
- For married couples filing jointly where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $109,000 to $129,000, up from $105,000 to $125,000 in 2021.
- For IRA contributors who are not covered by a workplace retirement plan but are married to someone who is, the phase-out range is $204,000 to $214,000, up from $198,000 and $208,000 in 2021.
- For a married taxpayer who is filing separately and is covered by a workplace retirement plan, the phase-out range is $0 to $10,000. This amount holds steady.
These amounts do vary for individuals with Roth IRAs or the Saver’s Credit. For detailed information, review the IRS website’s updated guidelines.
Saver’s Credit Updates in 2022
The Saver’s Credit, which is also called the retirement savings contribution credit, is an effort that allows low- to moderate-income employees to take a tax credit for contributions made to the following plans:
- Traditional IRA
- Roth IRA
- Simplified Employee Pension (SEP) plan
The income limit for using the Saver’s Credit has increased in 2022. The new limits are $68,000 for married couples that file jointly, $51,000 for heads of household, and $34,000 for single taxpayers or married couples that file separately.
Supplement Your Retirement Savings with Life Settlement Advisors
If you find yourself in a position where you’d like to increase the amount of money you’re saving for retirement, one option is a life settlement. With a life settlement, life insurance policyholders can sell their life insurance policy for a one-time cash payment that can be used for anything—including making investments for your future.
Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home, or any other valuable asset that will create immediate cash. Contact us today to learn more.
Life Settlement Advisors