The Internal Revenue Service (IRS) just gave you a little more wiggle room in preparing for retirement. They announced some increased contribution limits for 2022.
The contribution limit for Traditional Individual Retirement Accounts (IRAs) remains the same 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 contribution limit rises to $20,500, a $1,000 increase. Catch-up contributions remain at $6,500.1
Income eligibility for Roth IRA contributions has increased, as well. These have increased to between $129,000 to $144,000 for single filers and heads of households, and $204,000 to $214,000 for those married couples filing jointly.1
Savings Incentive Match Plans for Employees (SIMPLE IRAs) received an increased contribution limit as well. The 2022 limit is $14,000, up from $13,500.1
If the above increases apply to your retirement strategy, you may want to consider making some adjustments to your contributions. Your trusted financial advisor can help you decide how to best take advantage of the increased limits.
Once you reach age 72, you must begin taking required minimum distributions 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.
Once you reach age 72, 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.