401(k) & IRA contribution limits for 2022

Good morning and welcome back to Coffee & Cash!

In today’s video we’re going to quickly cover the new 401(K) contribution limits for 2022. Let’s jump right into it. Saving for retirement, at times, can seem like a daunting task. But utilizing a 401(k) account, if your employer offers one, is one of the best and most tax-friendly ways to build a nest egg.

A traditional 401(k) is an employer-based retirement savings account that you fund through payroll deductions before taxes have been taken out if you use the pre-tax sleeve, or after-tax if you use the Roth sleeve. Pre-tax contributions lower your taxable income and help cut your tax bill. For example, if your monthly income is $5,000 and you contribute $1,000 of that to your 401(k), only $4,000 of your paycheck will be subject to tax. While the money is in your account, it is sheltered from taxes as it grows. Many employers also match their employees' contributions up to a certain percentage of salary.

Workers saving for retirement have a reason to celebrate over the 401(k) contribution limits for 2022. Workers who are younger than age 50 can contribute a maximum of $20,500 to a 401(k) in 2022. That’s up $1,000 from the limit of $19,500 in 2021. If you're age 50 and older, you can add an extra $6,500 per year in "catch-up" contributions, bringing your total 401(k) contributions for 2022 to $27,000. Contributions to a 401(k) are generally due by the end of the calendar year.

The IRA contribution limit has not changed, as individuals can still contribute up to $6,000 total between their traditional IRA and Roth IRA accounts. IRA savers ages 50 and older can make an annual catch-up contribution up to $1,000 in 2022 or $7,000 total.

If you have any questions about your retirement savings, please give us a call or book a time right on our calendars by clicking the link.

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