This is the time of year for festive gatherings and generosity. It’s also the time of year when we get a glimpse of expected financial changes for 2022.
Contribution limits for some retirement accounts will be increasing in 2022. We expect 401(k) contribution limits to increase to $20,500 (not counting catch-up contributions for those over age 50). Contribution limits for Simple IRAs and SEP IRAs are also expected to increase to $14,000 and $61,000 respectively for 2022. Limits on contributions to Traditional IRAs and Roth IRAs will remain at $6,000 for next year.
Additionally, the Social Security Administration (SSA) has announced the cost-of-living adjustments (COLA) for 2022. Social Security recipients should see a 5.9% increase in monthly benefits paid (the COLA increase for 2021 was 1.3%). Social Security adjustments are tied to the Consumer Price Index each year, and given the increased level of inflation we’ve seen, benefit for recipients should increase accordingly. Based on the 5.9% increase, the SSA also announced that the annual Social Security earnings cap will be increase from $142,800 to $147,000. This means that in 2022, each taxpayer's first $147,000 in earnings will be subject to Social Security taxes. Social Security and SSI recipients should expect to receive information about their new benefit amount by mail beginning in December (and can find their COLA notice online through their Social Security accounts at www.socialsecurity.gov/myaccount).