If you have thought about opening up a retirement account for your investments, now is a great time to do so. There are a lot of benefits to contributing to a retirement account, especially if you start to do so early on in life. However, before you get started, there are a few things you should know about contributing to a retirement account in the quickly approaching year of 2022.
Why You Should Prioritize Retirement Contributions
One of the first things that you should know about opening a retirement account in 2022 is that you need to prioritize your payments and contributions to the account each month. Especially if you are just starting your retirement fund and are already a little bit later in life, you need to make a plan for your contributions to your retirement fund. Make sure that you examine your income and budget out a monthly or bimonthly contribution that you can consistently make to your retirement account. This will help your account to grow steadily, which will be helpful once you reach retirement age.
Contribution Limit Increases
Next, it is very important to be aware of contribution limits that apply to your retirement account(s). There are a variety of different retirement funds that you might open, so make sure that you find an account that has a contribution limit that will work for your budget and goals. For example, the contribution limit for SIMPLE IRA accounts has risen to $14,000, compared to the $13,500 from last year. Additionally, the total limit for all 401(k) contributions rises to $61,000 in 2022. Make sure that you’re aware of these limit increases before you choose which type of retirement fund you’d like to open.
Check Your Eligibility
In years past, not all people have been eligible to contribute to a tax-advantaged retirement account due to their income. Some individuals of high or low income have had certain limitations put on their contribution eligibility. Luckily, one of the great changes coming in 2022 is that more people will be eligible to contribute to these types of accounts, specifically people that have had too high or too low an income in years past. This can be a great way to save money for retirement.
So, if you’ve been wondering if this year would be a good time for you to open up a retirement account, remember what you’ve learned from this article. No matter if you feel that you’re a little late to the investment game, or if you’ve just landed your first job, there are many benefits that having a retirement account could bring to you. Just remember, there is never a bad time to invest in your future.
Check out this article on common sources of income in retirement!