Preparing for retirement just got a little more financial wiggle room. The Internal Revenue Service (IRS) announced new contribution limits for 2022.
Staying put for 2022 are traditional Individual Retirement Accounts (IRAs), with the limit remaining at $6,000. The catch-up contribution for traditional IRAs remains $1,000 as well.1
For workplace retirement accounts such as a 401(k) or 403(b) the new 2022 contribution limit rises $1,000 to $20,500. Catch-up contributions remain at $6,500.1
Income eligibility for Roth IRA contributions has increased, as well. These have bumped from $129,000 to $144,000 for single filers and heads of households, and $204,000 to $214,000 for those filing jointly as married couples.1
Another increase was for Savings Incentive Match Plans for Employees (SIMPLE IRAs), which increases from $13,500 to $14,000.1
If these increases apply to your retirement strategy, you may want to make some adjustments to your contributions. Where I can be of any help, I welcome the opportunity.
Once you reach age 72, you must begin taking required minimum distributions (often called RMDs) from a Traditional Individual Retirement Account (IRA) or Savings Incentive Match Plan for Employees IRA in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
Generally, once you reach age 72 ((if age 70½ was attained after December 31, 2019), you must begin taking required minimum distributions from your 401(k), 403(b), or other defined-contribution plans in most circumstances. Withdrawals from your 401(k) or other defined-contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner's death. The original Roth IRA owner is not required to take minimum annual withdrawals.
This content is developed from sources believed to be providing accurate information, and provided by Verity Wealth Partners and Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.