Ubiquity
Share via:
Subscribe

How to Save More in 2022 With a 401(k)

Dylan Telerski / 10 Feb 2022 / Business

Blog Illustration: Saving money in your 401(k) in 2021

Small business employers and employees with a 401(k) plan can save more in 2022 in more ways than one:

  • Higher limits: Increasing IRS limits will allow you to save more in 2022, so it’s worth looking into strategies that allow you to maximize your 401(k) investment.
  • Smart saving strategies: You might cut back on spending or pick up a side gig to bring in more income, refinance your mortgage to take advantage of rock bottom interest rates, or put bonuses and tax refunds into your retirement savings account.
  • Reduced tax burden: Even when times are tough, knowing how to take full advantage of a 401(k) opportunity can build significant wealth over time while also lowering your tax bracket for the year.

A small business 401(k) is the ideal way to generate considerable wealth for retirement using investment returns and compounding interest. The wise use of pre-tax dollars can ease your 2022 income tax burden as well.

How to save more for retirement with a 401(k) in 2022

From 2021 IRS 401(k) savings limit have increased $1,000 in 2022 to $20,500. The 2021 401(k) catch-up contribution for those age 50 and over will remain the same in 2022, letting those who qualify add another $6,500 in savings. It’s important to note that 401(k) plan contributions can be made with pre-tax dollars, so the more you contribute, the less you’ll be taxed on this year. Even $1,000 contributed can be enough to lower your tax bracket and the percentage of your income paid to the IRS.

Employers have the option to add a discretionary contribution of up to $40,500 to an employee’s account. Also, if you are a small business owner with a Solo 401(k), you’re able to contribute to your plan as both employee and employer – to a maximum amount of $61,000 in 2022. Your spouse may join the plan, potentially bringing your household maximum to $122,000. The $6,500 catch up contribution (for individuals age 50 or older) is allowed in addition to these maximum limits.

Surprisingly, IRA limits aren’t changing in 2022 – they’re still $6,000 or $7,000 if you’re age 50 or older – so using a 401(k) savings vehicle is wise if you’re hoping to combat this year’s inflation spike.

How much should I set aside to max out my 401(k) in 2022?

Investors under age 50 who are on a biweekly pay schedule will need to save $788 per check to reach the $20,500 retirement plan contribution limit in 2022. Those over 50 looking to capitalize on the catch up bonus will need to save $1,038.

What strategies do people use to max out a 401(k)?

There are numerous strategies to help you save more for retirement in 2022, such as:

  • Saving your entire annual raise to put into your account.
  • Putting tax refunds, profit shares, and bonuses into savings.
  • Using birthday or holiday cash and inheritance money to maximize a 401(k).
  • Taking smaller budget trips rather than large vacations.
  • Cutting back on spending in small ways – like eating out one time less per week.
  • Canceling unnecessary or unused membership subscriptions.
  • Refinancing the mortgage to lower housing costs and putting the difference into the 401(k).

How can I change my 401(k) deferral elections in 2022?

Employees may contact their Human Resources Department at any time to change a 401(k) deferral election. The employer will then contact their 401(k) plan provider to make the changes. As a provider and administrator, Ubiquity offers 401(k) plans geared toward small businesses. Contact us to learn more about maximizing your 401(k) savings this year.

How much will you pay for 401(k)? Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

© 2022 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

Facebook Twitter LinkedIn YouTube

© 2022 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

Credit Card Logos
Show Exit Modal