Individuals have used retirement accounts for decades to receive tax-advantaged savings for retirement. There are a wide variety of retirement accounts, each of which has its contribution limits, some of which are income-dependent. In 2022, many of these contribution limits have changed, which is necessary for individuals to know if they want to take full advantage of their retirement accounts.
Contribution limits changed again in 2023. Click here to read more about the 2023 updates to contribution limits.
How do retirement account contribution limits work?
The IRS limits the amount of capital that can be invested into certain retirement accounts each year. These limits help ensure that those with high incomes can’t take advantage of tax-free savings more than the average worker.
Contribution limits are “inflation-indexed,” meaning these limits are altered based on current inflation levels. The IRS considers the amount of inflation on the US dollar each year and changes retirement account contribution limits based on inflation statistics.
However, in years like 2020, when inflation is low, contribution limits are kept the same as the previous year. But because 2021 saw a significant change to inflation, the IRS has chosen to alter IRA and other retirement account contribution limits for 2022 to reflect inflation.
Precious Metals IRAs
Like other retirement accounts, a precious metals IRA allows you to invest in precious metals inside of a tax-advantaged retirement account. To hold precious metals directly, you need to open a self-directed IRA (SDIRA), which allows you more control over your retirement portfolio and the option to purchase precious metals directly. Instead of buying paper-based financial derivatives like futures or options, you can purchase metals directly like gold, silver, platinum, or palladium to save for retirement.
What’s new for 2022?
The IRS modifies retirement account contribution and income limits annually, and for 2022 they’ve implemented changes to both the IRAs and 401(k)s. For an IRA, the contribution limit of $6,000 in 2021 remains the same for 2022 with small increases to the phase-out income limits for Roth IRAs.
As for a 401(k) account, the contribution limit is currently $20,500 for 2022 contributions compared to $19,500 in 2021. These changes in contribution limits also depend on the type of retirement account and the age of the contributor.
What changed in each type of retirement account?
Traditional IRAs
Traditional IRA contribution limits for 2021 remain the same as 2021, so it’s important not to overcontribute to an IRA. The most common retirement account is an individual retirement account — or IRA. An IRA allows you to save pre-tax dollars for retirement, thereby lowering your taxable income today. When withdrawing funds during retirement, they are taxed as income.
| Traditional IRA | 2022 | 2021 |
| Contribution limit under age 50) | $6,000 | $6,000 |
| Catch-up contribution limit over age 50 | $1,000 (additional) | $1,000 (additional) |
Roth IRAs
Roth IRAs allow individuals to invest after-tax income toward retirement. (This is the opposite of a traditional IRA in which contributions are made before taxes are paid.) The benefit of paying taxes on retirement savings upfront is that your savings, and returns, can be withdrawn tax-free in retirement. Roth contribution limits didn’t increase for 2022, but the income limits did.
| Roth IRA | 2022 | 2021 |
| Contribution limit under age 50 | $6,000 | $6,000 |
| Catch-up contribution limit over age 50 | $1,000 (additional) | $1,000 (additional) |
| Income limit for full contribution (individual filer) | $129,000 | $125,000 |
| Income limit for full contribution (joint filer) | $208,000 | $198,000 |
401(k)s
A 401(k) account is an employee-sponsored retirement account. It operates similar to an IRA, but your investment options are controlled by your employer, who may also contribute additional funds toward your retirement with an “employer match.” Your 401(k) may provide Traditional or Roth or both types of account options.
| 401(k) | 2022 | 2021 |
| Contribution limit | $20,500 | $19,500 |
| Catch-up contribution (over age 50) | $6,500 (additional) | $6,500 (additional) |
SIMPLE IRAs
A Savings Incentive Match Plan for Employees (SIMPLE) IRA is another employer-sponsored retirement account. A SIMPLE IRA is often utilized by smaller employers. Contribution limits for a SIMPLE IRA tend to be lower than a 401(k) or similar employer-sponsored plan.
| SIMPLE IRA | 2022 | 2021 |
| Contribution limit | $14,000 | $13,500 |
| Catch-up contribution (over age 50) | $3,000 (additional) | $3,000 (additional) |
SEP IRAs
A Simplified Employee Pension (SEP) IRA lets an employer contribute funds to a traditional IRA for their employees. This also serves as a retirement savings plan for self-employed individuals. In a SEP, the employee doesn’t make contributions, and instead, only the employer makes contributions to the retirement account.
| SEP IRA | 2022 | 2021 |
| Contribution limit | $61,000 or 25% of net earnings | $58,000 or 25% of net earnings |
403(b)s
Retirement planning for employees of 501(c)3 tax-exempt organizations looks slightly different. Employees of a 501(c)3 tax-exempt organization or public school can utilize a 403(b) retirement plan. Tax advantages of a 403(b) are similar to a 401(k) but may come with added benefits like shorter vesting periods and exemptions from nondiscrimination testing.
| 403(b) | 2022 | 2021 |
| Contribution limit | $20,500 | $19,500 |
| Catch-up contribution (over age 50) | $6,500 (additional) | $6,500 (additional) |
457(b)s
Similar to a 403(b), a 457(b) offers tax-advantaged retirement savings for employees of state and local governments (along with some select nonprofit organizations). Contributions to a 457(b) are pre-tax (like Traditional IRAs), as any earnings taxed at the time of withdrawal.
| 457(b) | 2022 | 2021 |
| Contribution limit | $20,500 | $19,500 |
| Catch-up contribution (over age 50) | $6,500 (additional) | $6,500 (additional) |
Thrift Savings Plans (TSPs)
A TSP is afforded to any federal employee and/or member of the armed forces. Resembling a 401(k) plan, a TSP offers a more limited option of investments, with only six funds available for account holders. Additionally, there are no income limits to prevent high-income earners from contributing to a TSP if desired.
| TSP | 2022 contribution limit | 2021 contribution limit |
| Contribution limit | $20,500 | $19,500 |
HSAs
A Health Savings Account (HSA) allows you to save money on federal income tax for medical expenses. Investments in HSAs are completely tax-free, meaning you don’t pay taxes when investing nor when you withdraw it to pay for medical expenses.
HSA accounts may be offered along with high deductible health plans by employers. According to the IRS, you can only contribute to an HSA if your minimum annual deductible is $1,400 for an individual or $2,800 for those with family coverage.
| HSA | 2022 contribution limit | 2021 contribution limit |
| Individual coverage | $3,650 | $3,600 |
| Family coverage | $7,300 | $7,200 |
What does this mean for Precious Metal IRAs?
Given that the IRS has increased the contribution limits on individual retirement accounts, it’s safe to say that inflation has increased over the past year, and the numbers back this up. As inflation rises, more investors seek to store their wealth in safe, stable assets. This is why Precious Metal IRAs are more important than ever, as precious metals are assets that retain their intrinsic value well regardless of changing economic conditions.
Because contribution limits on IRA accounts are increasing in 2022, you will be able to contribute more tax-advantaged retirement savings into precious metals like gold, silver, platinum, and palladium. At the same time, these retirement account changes do not affect your ability to choose precious metals for your IRA.
Higher contribution limits are better for everyone with an IRA. And Birch Gold Group can help you take advantage of these higher limits with your Precious Metals IRA. Get in touch with a Birch Gold Group representative to learn more about setting up a Precious Metals IRA, rolling over an existing IRA, or opening an account today.
