Category: News (Page 9 of 9)

The IRS announced in November increases to retirement plan limits for 2022. The 2022 contribution limit for 401(k) plans will increase to $20,500, which means that next year you can put an extra $1,000 into your 401(k) plan. The IRS also announced cost‑of‑living adjustments that may affect pension plan and other retirement-related savings in the coming year.

Highlights of changes for 2022

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 in 2022. Limits on contributions to traditional and Roth IRAs remains unchanged at $6,000.

You can also deduct contributions to a traditional IRA if they meet certain conditions. If neither you nor your spouse is covered by a retirement plan at work, your full contribution to a traditional IRA is deductible. If you or your spouse is covered by a retirement plan at work, the deduction may be reduced or eliminated. The amount of the deduction depends on your filing status and your income.

Traditional IRA income phase-out ranges for 2022

• $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

• $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

Saver’s Credit income phase-out ranges for 2022

• $41,000 to $68,000 – Married, filing jointly.
• $30,750 to $51,000 – Head of household.
• $20,500 to $34,000 – Singles and married individuals filing separately.

The amount individuals can contribute to SIMPLE retirement accounts also increases to $14,000 in 2022.

It was announced by the Social Security Administration (SSA) in October that the maximum amount of an individual’s taxable earnings in 2022 subject to Social Security tax will be $147,000, up from $142,800 for 2021. The wage base limit applies to earnings subject to the tax, known officially as the old age, survivors, and disability insurance (OASDI) tax. Because the OASDI tax rate is 6.2%, an employee with total wages from an employer at or above the maximum in 2022 will pay $9,114 in tax, with the employer paying an equal amount.

The Medicare hospital insurance tax of 1.45% each for employees and employers has no wage limit and is unchanged for 2022.

Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly and $125,000 for married taxpayers filing separately) are required to pay an additional hospital insurance tax of 0.9% of wages with respect to employment (also unchanged).

Self-employed individuals pay self-employment tax equal to the combined OASDI and Medicare taxes for both employees and employers, i.e., 15.3%, up to the OASDI wage base and 2.9% in Medicare taxes on net self-employment income above it, with an offsetting above-the-line income tax deduction of half of the OASDI-equivalent component of self-employment tax.

Approximately 70 million Americans will see a 5.9% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2022. Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W).

The CPI-W rises when inflation increases, leading to a higher cost-of-living. This change means prices for goods and services, on average, are a little more expensive, so the cost-of-living adjustment (COLA) helps to offset these costs.

The Social Security Administration will mail COLA notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees. But, if you want to know your new benefit amount sooner, you can securely obtain your Social Security COLA notice online using the Message Center in your my Social Security account. You can access this information in early December prior to the mailed notice. If you don’t have an account yet, you must create one by November 17, 2021, to receive the 2022 COLA notice online.