Do a Check-Up on Your Retirement Plans
It’s a wise decision to check on your savings and retirement goals at least once a year. If you haven’t given your retirement plan a check-up yet in 2022, there is no time like the present.
Let’s look at what the current Internal Revenue Service rules are for 2022.
401(k), 403(b) and most 457 plans
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $20,500. That’s up $1,000 from 2021.
Anyone 50 or older is allowed an extra $6,500 as a “catch-up” contribution, for a total of $27,000. Important to note is that employer contributions do not count toward these limits.
However, the IRS does limit the combined contributions made by employers and employees. For 2022, that limit is $61,000, and it’s $67,500 for participants age 50 or older, reflecting the catch-up amount allowed.
For simple 401(k) plans, which a small business might offer, there is a contribution limit of $14,000 for 2022. The catch-up amount is $3,000.
Solo 401(k) plans — often used by the self-employed with no employees — come with the same contribution limits as traditional 401(k) plans.
Traditional and Roth IRAs
Limits on contributions to traditional and Roth IRAs remain unchanged at $6,000.
The maximum amount you can contribute to a traditional IRA for 2022 is $6,000 if you're younger than age 50.
Workers aged 50 or older can add an extra $1,000 per year as a "catch-up" contribution, bringing the maximum IRA contribution to $7,000 for those workers. You must have earnings from work to contribute to an IRA, and you can't put more into the account than you earned.
Annual Check-up Tips
Make a list of every retirement account you have and each account’s balance. The list may include plans through your current employers, former employers and other savings accounts.
- Review your retirement goals and see if they have changed from last year. Figure out what income you expect to have after you stop working. The retirement savings you need depends on how long you’ll continue working as well as the average life span and costs (and in particular, health care.)
- Review how much you are currently contributing to your retirement savings plan. See if you are still on track to meet your retirement goals.
- If you are offered a plan through your employer with an employer match, make sure you are contributing at least enough to receive the maximum employer match.
- If your employer doesn’t have a retirement savings plan, you can set up and contribute to a traditional or Roth individual retirement account (IRA).
If you don’t have an individual retirement account, get started today! BancorpSouth can help!
Sources: IRS, Social Security Administration, FDIC