For 2022, the annual contribution limit for SIMPLE IRAs is $14,000, up from $13,500 in 2021. Workers age 50 or older can make additional catch-up contributions of $3,000, for a total of $17,000.
By comparison, workers younger than 50 can salt away as much as $20,500 in a traditional 401(k) for 2022, plus another $6,500 if they’re 50-plus.
Employer Contributions to SIMPLE IRAs
Good news for workers participating in a SIMPLE IRA: Employers must make some form of a contribution to employees’ accounts. An employer can choose to either make a dollar-for-dollar match of up to 3% of a worker’s pay or contribute a flat 2% of compensation, whether the employee contributes or not. If your employer matches dollar-for-dollar up to 3% of pay, make sure you’re contributing at least enough to qualify for the full match.
2022 401(k) Contribution Limits
Workers who are younger than age 50 can contribute a maximum of $20,500 to a 401(k) in 2022. That’s up $1,000 from the limit of $19,500 in 2021. If you’re age 50 and older, you can add an extra $6,500 per year in “catch-up” contributions, bringing your total 401(k) contributions for 2022 to $27,000. Contributions to a 401(k) are generally due by the end of the calendar year.
Roth IRA Contribution Limits for 2022
The maximum amount you can contribute to a Roth IRA for 2022 is $6,000 if you’re younger than age 50. If you’re age 50 and older, you can add an extra $1,000 per year in “catch-up” contributions, bringing the total contribution to $7,000. This remains unchanged from 2019.
The actual amount that you are allowed to contribute to a Roth IRA is based on your income. To be eligible to contribute the maximum amount in 2022, your modified adjusted gross income must be less than $129,000 if single or $204,000 if married and filing jointly. Contributions begin to be phased out above those amounts, and you can’t put any money into a Roth IRA once your income reaches $144,000 if a single filer or $214,000 if married and filing jointly.
SEP IRA Contribution Limits for 2022
For 2022, a self-employed business owner effectively can salt away as much as $61,000. (That’s up from the maximum of $58,000 in 2021.) In comparison, a traditional IRA limits contributions to $6,000 for 2022 for those younger than 50, or $7,000 for those 50 or older thanks to a $1,000 “catch-up” contribution.
SEP IRAs are available for a variety of small-business types, including sole proprietorships, partnerships, limited liability companies, S corporations and C corporations. The plans can be an especially attractive option for a small business with few employees.