401 (k) News and Investing Summer 2022
This year taxpayers can put an extra $1,000 into their 401(k) plans. The IRS announced that the 2022 contribution limit for 401(k) plans is now $20,500. 401(k) Plan participants may also contribute to their own Individual Retirement account (IRA). It is recommended that Plan participants max out your company 401(k) contributions before considering an IRA. 401(k) contributions are before -tax which lowers your taxable income!
Highlights of changes for 2022
The contribution limit for employees who participate in 401(k), increased to $20,500. Limits on contributions to traditional and Roth IRAs remains unchanged at $6,000.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If neither the taxpayer nor their spouse is covered by a retirement plan at work, their full contribution to a traditional IRA is deductible. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated. The amount of the deduction depends on the taxpayer's filing status and their income.
Traditional IRA income phase-out ranges for 2022 are:
• $68,000 to $78,000 - Single taxpayers covered by a workplace retirement plan
• $109,000 to $129,000 - Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
• $204,000 to $214,000 - A taxpayer not covered by a workplace retirement plan married to someone who's covered.
• $0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan
Roth IRA contributions income phase-out ranges for 2022 are:
• $129,000 to $144,000 - Single taxpayers and heads of household
• $204,000 to $214,000- Married, filing jointly
• $0 to $10,000 - Married, filing separately
Please call Aspetuck Financial Management if there is interest in establishing an IRA. See your tax adviser on the deductibility of your contributions to your IRA.