Traditional & Roth IRA
New Year! New Contribution Limits!
January 12, 2022
By: Pacific Life Annuities
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If saving more for retirement is one of your clients’ New Year’s resolutions for 2022, the table and links below will help plan for the 2022 contributions and help get your clients closer to meeting retirement-savings resolutions.

 

The Internal Revenue Service (IRS) has announced the 2022 cost-of-living adjustment (COLA) increases to contribution limits for Individual Retirement Accounts (IRAs) and qualified plans.

Each year, the IRS adjusts these numbers for cost-of-living increases in $500 increments when statutory thresholds are met. Although there were no changes to traditional and Roth IRAs, there was an increase for defined contribution limits with employer plans. In addition, the life expectancy tables used to calculate required minimum distributions (RMDs) also have been updated.

While discussing maximum contributions with clients for traditional or Roth IRAs, it’s important to understand the deductible IRA and Roth IRA phaseout ranges to avoid the 6% excess contributions penalty. The table below may help with planning contributions for 2022.

 

IRA Contributions Limits 2021 Limits 2022 Limits COLA Increases
Traditional and Roth IRA Contribution Limits $6,000 $6,000 No change
Traditional and Roth IRA Catch-Up
Contributions (Ages 50 and Older)		 $1,000 $1,000 No change
SIMPLE IRA Maximum Contributions $13,500 $14,000 $500
SIMPLE IRA Catch-Up Contributions
(Ages 50 and Older)		 $3,000 $3,000 No change
SEP-IRA Contribution Limit $58,000 $61,000  $3,000
401(k), 403(b), and 457(b) Maximum
Elective Deferrals		 $19,500 $20,500 $1,000
401(k), 403(b), and 457(b) Catch-Up
Contributions (Ages 50 and Older)		 $6,500 $6,500  No change
IRC 415 Defined Contribution Limits $58,000 $61,000 $3,000
Qualified Longevity Annuity Contract
(QLAC)		 $135,000 $145,000 $145,000

 

Here are some considerations on how to help clients meet their New Year’s resolutions to save more for retirement:

  • Each year while making decisions to fund retirement savings, clients and their financial professionals keep in mind phaseout ranges to contribute to traditional and Roth IRAs. For clients who exceed the phaseout range (provided in the link below), there is now an additional $1,000 they can contribute to their retirement plans.

  • Clients owning Individual 401(k) accounts (also called Indi(k) accounts) receive quite a bump on contribution maximums. In 2022, clients have an additional $4,000 they could contribute: $1,000 salary deferral and $3,000 employer contribution.

  • The RMD tables have been updated and could help clients keep retirement savings stashed away. The adjustment will decrease annual RMD requirements, which can result in more legacy savings for the retiree. As retirees get closer to retirement, most take action by maxing out contribution amounts using different tax-efficient vehicles. The 2022 cost-of-living-adjustment provides additional avenues for retirees to increase savings for retirement and legacy planning.
     

More information regarding COLA and phaseout ranges can be found in the 2022 Limitations Adjusted link below as provided in Section 415(d), etc. IRS notice. To help illustrate the maximum allowable contributions for traditional and Roth IRAs, refer to the “How Much Can I Contribute to an IRA?” calculator.

Good tax planning is a great first step for a bright 2022!

 


Additional Resources and Links

2022 Limitations Adjusted

Updated Life Expectancy

 

For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com

 

This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Information is based on current laws, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations.

 

This material is educational and intended for an audience with financial services knowledge.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

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