facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Key 2022 Investment and Other Numbers Thumbnail

Key 2022 Investment and Other Numbers

Retirement Funding Taxes

The calendar will flip over before we know it. And with the passing of another year, more than a few things will change in regards to your ability to contribute to some accounts and the amounts you can contribute to them. Let's take a look.

Retirement Account Contribution Limits

Limits on contributions to retirement accounts are index to inflation. And since we're seeing a bit more inflation than we're used to, the contribution limits to most types of retirement accounts have gone up a fair bit.

  • 401(k) Accounts (also 403(b), 457 and TSP) salary deferral limit increases by $1,000 to $20,500. Catch-up contributions are likely to remain at $6,500 for a total of $27,000 for those age 50 or older.
  • Defined Contribution limits increase as well to $61,000 (a $3,000 increase). This is the total that can be contributed to a 401(k) (plus its relatives) when employer contributions are included. The amount is increased by $6,500 for those 50 or older. It is important to note that for employer contributions to be deductible for the employer, they can't exceed 25% of the employee's compensation. The limit also applies to defined contribution plans that are much less common
  • Amazingly, contribution limits to IRAs (Roth and Traditional) are unchanged. It seems strange, but even at 5% inflation, the increase would be $300 and the IRS only makes changes in $500 increments. So, we'll probably see an increase in 2023.
  • SEP-IRA contributions will increase by $3,000 to $61,000 (but also have the 25% of compensation limit as a Defined Contribution plan)
  • SIMPLE-IRA contribution limits increase by $500 to $14,000
  • HSA and FSA contribution limits increase by $100

Retirement Account Participation Limits

  • The ability to contribute to a Roth IRA (pay attention if you've just retired or haven't retired from the military yet) is limited and phases out. For married couples, the start of the phase out increases by $6,000 to $204,000 and will be completely phased out by $214,000. For those of you who file single, the phase out range is from $129,000 - $144,000 and increase of $4,000 (note also that the phase out range for singles is $15,000 and for married couples it is $10,000).
  • If you're not covered by a retirement plan at work, contributions to a Traditional IRA are fully deductible. If you're covered by a retirement plan at work the deduction can be limited (you can always make the contribution, you just might not be able to deduct it). The limits increase $4,000 and the new phase-out range is $109,000 - $129,000 for married taxpayers. For single taxpayers, the limits increase by $2,000 to $68,000 - $78,000. If one taxpayer in the couple is covered by a retirement plan at work, then the limits for deducting a Traditional IRA contribution for the other spouse are the same as for Roth IRAs.

One Other Thing to Note

Not only do Social Security benefits increase with inflation, but so does the amount of Social Security taxes you pay. You pay Social Security taxes up to an annual limit. In 2021 you paid Social Security taxes up to $142,800 of wages and/or self-employment income. In 2022, the limit will be $147,000. If you were over the limit in 2021 and will be in 2022, you'll pay $260.40 more in Social Security taxes.

If you found this article interesting, you might like the following blog posts:

Military Finances 301: Donating a Car (or Boat) and the Tax Effects

Retired Military Finances 201: Remote Work and State Income Taxes

Military Finances 301: Tax Efficient Support to Charity

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.