Services
Tax Accounting Payroll Advisory             Our Offices

View Padgett President Roger Harris' congressional testimony on the impact of the Corporate Transparency Act and the BOI reporting requirements here.

Find an office
Skip to main content

Understanding IRAs: your retirement savings guide

With the recent passing of the SECURE 2.0 Act of 2022, you may have questions about the different types of Individual Retirement Accounts (IRAs) available. How do you choose what retirement plan is right for you? 

IRAs are a powerful tool for retirement savings. They are savings plans that come with tax advantages to help taxpayers build a retirement fund. Each type of IRA has its own set of regulations and deadlines. Here’s a quick overview of the most common kinds: 

Traditional IRA:

Contributions to a traditional IRA may be tax deductible and earnings grow tax-deferred until distribution, which means you won’t pay taxes on your traditional IRA funds until you make a withdrawal. The contribution limit for 2022 is $6,000, or $7,000 for those aged 50 and over ($6,500 and $7,500 for 2023). You have until April 15 or the tax filing deadline of the following year to make contributions for the previous tax year. Since the deadline is April 18 this year, you have a few extra days to make contributions for 2022. 

Roth IRA:

Unlike a traditional IRA, contributions to a Roth IRA are made after tax, so qualified withdrawals are tax-free. The contribution limit for 2022 is also $6,000, or $7,000 for those aged 50 and over ($6,500 and $7,500 for 2023). Roth IRAs have the same deadline as traditional IRAs, so you can contribute up until April 18 this year. 

SEP IRA:

A Simplified Employee Pension (SEP) IRA is a retirement plan for business owners and their employees. Employers can make tax-deductible contributions on behalf of eligible employees to their SEP IRAs. To be eligible, the employee must be 21, worked in the business at least 3 of the last 5 years and made at least $650 in 2022 ($750 in 2023). Like traditional IRAs, the earnings grow tax-deferred until the money is withdrawn. In 2022, employers can contribute up to 25% of compensation or $61,000 (whichever is less) to an employee’s plan ($66,000 in 2023). The same contribution limits apply if you are self-employed. Contributions must be made by your business’s tax-filing deadline, including extensions. 

SIMPLE IRA:

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a retirement plan for businesses with 100 or fewer employees that do not have any other retirement savings plan, including self-employed individuals. Because SIMPLE IRAs have lower start-up and operating costs, they are ideal for small employers. Employers must contribute a matching contribution for each eligible employee of either 3% of an employee’s compensation, or a nonelective contribution of 2% of the employee’s compensation, up to $305,000 for 2022 ($330,000 for 2023). Eligible employees include all employees who received at least $5,000 in compensation during any two preceding calendar years and in the current calendar year. An employee can contribute up to $14,000 from their salary in 2022 ($15,500 in 2023), and up to $17,000 for those 50 and over ($19,000 for 2023). Contributions must be made by the tax-filing deadline, including extensions. 

The rules and regulations surrounding IRAs can be complex and can change, so it’s always good to consult with a financial advisor and tax professional to ensure that you’re maximizing your retirement savings while complying with the plan rules.  

Whether you’re an individual looking to build your retirement fund or a small business wanting to offer a retirement plan to your employees, Padgett can help! Our nationwide network of EAs, CPAs and small business advisors are ready to work with you to prepare for the future. Find a location near you today! 

Breaking Down the SECURE Act 2.0

Roger and Annie discuss the changes in the SECURE 2.0 Act of 2022 and how this impacts small business owners with regards to offering retirement plans to their employees. They also talk about recent changes in IRS regulations that could prove beneficial to taxpayers dealing with ERC.

Sponsors
Padgett -  https://www.padgettadvisors.com/join/?podcast 


Get NASBA Approved CPE or IRS Approved CE
Launch the course on EarmarkCPE to get free CPE/CE for listening to this episode.

Links mentioned in this episode

Chapters

  • (00:00) - Federal Tax Updates E5
  • (01:57) - SECURE Act 2.0
  • (08:03) - Omnibus Package
  • (11:30) - How can the SECURE Act help small business owners?
  • (16:48) - In 2025 what changes could we see to retirement plans?
  • (19:15) - Different ways to get around the 10% penatly with retirement money
  • (24:08) - What is attractive about a starter 401k plan?
  • (26:03) - How the Secure Act is tying in Student loan forgiveness
  • (27:59) - What does the Secure act say about RMDs?
  • (32:40) - What can you do with money that is left in a 525 Plan?
  • (40:19) - What is happening to the IRS with the ERC
  • (46:26) - Potential P10 Refund
  • (47:13) - News on information returns
  • (51:39) - CPE Tax Forums
Follow the Federal Tax Updates Podcast on Social Media
twitter.com/FedTaxPod
facebook.com/FedTaxPod
linkedin.com/showcase/fedtaxpod

Connect with the Hosts on LinkedIn
Roger Harris
Annie Schwab

Review
Leave a review on Apple Podcasts or Podchaser

Subscribe
Subscribe to the Federal Tax Updates podcast in your favorite podcast app!

This podcast is a production of the Earmark Media

The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

We encourage you to contact us with any questions.

This field is for validation purposes and should be left unchanged.