Do you know the different retirement and 529 plan contribution limits for 2022?

It is important to take advantage of your retirement accounts as best you can if you want to be financially independent in the long run. Make sure you know the limits for your various accounts. Here's some high-level information for the 2022 tax year (ask a financial professional for more details on each account for a full picture):

~401(k) and 403(b): Contribution limit is $20,500 and catch-up contribution limit (how much employees aged 50 and older can make additionally) is $6,500.

~Traditional IRA: Contribution limit is $6,000 or $7,000 if you are 50 or older. You can only contribute earned income and you cannot contribute more than your earned income for the year. (There are other limitations that apply if you also participate in a plan at work)

~Roth IRA: Contribution limit is $6,000 or $7,000 if you are 50 or older. You can only contribute earned income and you cannot contribute more than your earned income for the year. If you are married filing jointly, there are phase outs to contribution levels between $204K and $214K, and you are not eligible to contribute to a Roth if income exceeds $214K. If you are a single filer, those numbers are $129K to $144K, respectively.

~What if you have a Roth and a Traditional-can you contribute the max to each account? NO, limits apply in the aggregate for both account types.

~529 Plans: You can contribute however much you like each year up to the state maximum, which is at least $235K per beneficiary in any state. Maryland has a high limit of $500K per beneficiary. Each year, you can technically contribute as much as you want as long as the lifetime limit is not surpassed for the beneficiary, but there are a couple things to note. If you (or the contributor) surpass the gift tax exclusion (which in 2022 is $16K), the amount in surplus would count against your lifetime gift tax exemption (12.06M or $24.12M, single or married). There is an exception where up to 5 years of contributions ($80K) can be "front-loaded" with no tax consequences so long as no more contributions were made in that 5 year period.

With that being said, try and take advantage of these tax advantaged accounts as best you can! And know the limits! #IRA #Roth #529plans

-Your Friends at Red Oak Financial Group