By Ryan DeMarco, CRPC ®, Edward Jones Financial Advisor, 111 N. Main St., Bluffton, 567-226-4506

You could spend two, or even three, decades in retirement. So, to pay for all those years, you’ll probably need to take full advantage of your retirement accounts. And in 2022, you may have expanded opportunities to deduct retirement plan contributions on your tax return.

Before looking at what’s changed this year, let’s review the key benefits of these accounts:

Traditional IRA – You typically contribute pretax (deductible) dollars to a traditional IRA, and your earnings can grow tax-deferred.

Roth IRA – You invest after-tax dollars in a Roth IRA, so your contributions won’t lower your taxable income, but your earnings can grow tax free, provided you’ve had your account at least five years and you’re 59½ or older when you begin taking withdrawals.

 401(k) – A 401(k) or similar plan (such as a 457(b) for state and local government employees or a 403(b) for employees of public schools or nonprofit groups) is generally funded with pretax dollars and provides tax-deferred earnings. Some employers offer a Roth 401(k), in which employees contribute after tax-dollars and can take tax-free withdrawals if they meet the same age and length-of-ownership requirements as the Roth IRA.

So, what’s different about these plans in 2022? First, consider the traditional IRA. If you – and your spouse, if you’re married – don’t have a 401(k) or similar plan, you can always deduct the full amount of your contribution on your tax return, no matter what you earn. But if one or both of you are covered by an employer-sponsored plan, then your deductions could be reduced or eliminated based on your income.

Single taxpayers can claim the full deduction if your modified adjusted gross income (MAGI) is $68,000 or less ($109,000 for married filing jointly), with deductibility decreasing at higher income levels and phasing out entirely at $78,000 ($129,000 for married filing jointly). But here’s the key point: Compared to 2021, these ranges are $2,000 higher for single filers and $4,000 higher for those who are married and filing jointly – which means that this year, you might have more opportunities to make deductible contributions.

And a similar type of increase applies to Roth IRA eligibility. In 2022, if you’re a single filer, you can put in up to $6,000 ($7,000 if you are 50 or older) in a Roth IRA if your modified adjusted gross income (MAGI) is less than $129,000 – up from $125,000 in 2021. Allowable contributions are reduced at higher income levels and phased out if your MAGI is $144,000 or more, up from $140,000 in 2021. If you’re married and file jointly, the respective ranges are $204,000–$214,000, up from $198,000–$208,000 in 2021. Again, higher ranges may mean more opportunities for you. (Consult your tax advisor to determine your eligibility to contribute to a Roth IRA or make deductible contributions to a traditional IRA.)

And finally, the annual contribution limit for 401(k), 457(b) and 403(b) plans is $20,500 – up $1,000 from 2021. If you’re 50 or older, you can put in an extra $6,500 this year, for a total of $27,000.

These changes may not seem monumental, but when you’re saving for retirement, any opportunities to invest and potentially reduce taxes, of whatever size, can be valuable. So, review your options to determine how you can help yourself move closer to your retirement goals.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Edward Jones, Member SIPC