Planning for retirement 2022: the new rules explained

Of course, cover the essentials. Do retirement things year after year. And if you are slower? Increase your contribution rate, even by just 1% per year.


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Retirement planning basics

Of course, cover the essentials. Do the right things year after year. However, there are specific things you need to do to ensure a secure retirement, Kirsten Hunter Peterson said. Ms. Peterson is director of the Workplace Thought Leadership team at Fidelity Investments.

The easiest thing to do is not leave money on the table, Peterson said. In other words, this includes maximizing your 401(k) plan or a comparable plan to maximize your employer’s contribution. You refuse free money.

However, saving enough is another essential retirement planning strategy. In other words, Fidelity suggests 15%. This includes any business correspondence or donations. If you save 10% and your company contributes 5%, you will reach the 15% goal.

And if you are slower? Increase your contribution rate, even if it is only 1% per year. Small gains accumulate. And don’t forget to pay off your debts.

Increase 401(k) contributions

Suppose you are 45 years old. The IRA had $63,000 as of mid-2020. At Fidelity, executives took the averages of IRA holders aged 45. Suppose your IRA grows at 7% per year.

Suppose you win $60,000. You earn 1% annual raises and save 6% of your salary. Obtain a 3% corporate match.

So what? Your retirement fund would be $849,551 at age 72.

What if you increase your pension contributions by 1% each year until you and your employer are contributing 15% per year? So keep it until retirement.

However, according to the Bankrate.com 401(k) calculator, you’ll have $1.019 million by 72. Over five years, a 1% annual increase translates to a 20% gain of nearly $169,400. A good deal. And in this case, your dues increases are about tenths of your annual salary increases.

savings success

However, beyond that, smart retirement planning must include the new requirements for 2022.

First, note which federal tax collectors are targeting retirement funds.

Consider President Joe Biden’s Build Back Better (BBB) ​​budget proposal. Admittedly, if the Senate adopts the BBB as drafted, it will be financed via multiple direct and indirect taxes on retirement savings.

However, a tax starts next year. Backdoor Roth IRA conversions would be prohibited. Currently, these conversions allow you to bypass the $140,000 income limit on Roth IRA contributions. It’s time to invest in a non-deductible conventional IRA. These are not income based. Then, in a Roth IRA, we go!

No new regulations. You would lose the right to keep the money forever. True, it would no longer be inherited and held for up to ten years. More information is available through AARP.

Understand the new taxes

Two new retirement taxes will come into effect if the Senate approves them in 2029. This gives you time to increase your income from previous years. That can keep you below the new income levels — $400,000 for single taxpayers and $450,000 for married joint filers — that trigger the new regulations.

However, another approach to dealing with higher retirement taxes? Investing in many accounts with different tax treatment, said Roger Young, senior retirement information manager at T. Rowe Price.

A tax will prohibit further contributions if your combined IRA and 401(k) balances exceed $10 million. Therefore, if not saved in a retirement plan, this income would be taxed.

One is indirect. The following year, you will have to withdraw 50% of your money. Tax laws assess tax on this money, except in a Roth.

However, if your total retirement account balance exceeded $20 million, you would have to pay it all off.

And don’t assume these are just problems for the rich. Many middle-class employees become retired billionaires, says IRAHelp.com founder Ed Slott. Suppose a couple earns a reasonable salary. For example, they started saving early. Many retire with $5 million at age 60. They can certainly triple it soon.

Your inflation-proof retirement

However, watch for rising inflation. Your best ally? Certainly, good retirement planning includes investing in funds that outperform inflation. This includes S&P 500 index funds. These include commodities, real estate investment trusts (REITs), and cyclical stocks.

See the other report in this area for more information.

New contribution limits

You should also keep track of which IRAs have updated contribution limits. After all, you want to save as much as you can. This is the maximum allowed in tax-deferred RRSPs.

It also allows you to obtain the highest employer contributions.

Here are the maximum donations for 2022:

  • $25,900 in 2022 for a married joint filing.
  • Amount: $6,500, unchanged from 2021.
  • IRA: $6,000, same as 2021.
  • $1,000 traditional catch-up or Roth IRA. This is for people 50 and older.

To finish

Stay on task. Don’t let distractions get you down. You know your goals. The price is clear. And attainable. So don’t confuse the issue. Keep your financial advisors reachable 24/7. Never let them forget who the money is. This is yours. Not theirs. So they better take care of that. Make it grow. And cherish it. Or you give them the old rant!

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