Saving for Retirement: IRA Changes for 2022

In 2019, Congress revisited the rules for qualified retirement plans and IRAs, with an eye toward boosting retirement savings. To that end, the age limit of 70½ for making a contribution to a traditional, deductible IRA was eliminated. However, one still must have “earned” income to make any IRA contribution – income from investments, pensions, gifts, and Social Security benefits does not count. 

The amount that may be contributed to traditional and Roth IRAs has not changed – 6,000 for 2022, as it was in 2021. Those 50 and older may make an additional $1,000 “catch-up” contribution. IRA contributions for the 2021 tax year are permitted until the tax filing deadline.

A contribution is one thing; the deduction is something else. Those who have no employer retirement coverage are permitted a full deduction for IRA contributions, regardless of income.  Those who have such coverage will find the deduction phases out as their Modified Adjusted Gross Income (MAGI) grows, as shown in the table below. A person whose spouse has an employer-provided retirement plan also has limits on the deduction.

The Roth IRA should be considered, especially by those whose income exceeds the deductibility threshold. There is no deduction for the contribution, but there is the possibility of complete tax freedom for all distributions. Income limits apply to Roth IRAs as well, but those limits are higher than for deductible IRAs.

Key IRA boundaries

Source: Internal Revenue Code; M.A. Co.

(January 2022)

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