401k Contribution Limit Already Reached for 2022? - Consider Indexed Universal Life Insurance (IUL)
Consider Indexed Universal Life Insurance (IUL) as a way to set more aside for retirement if your 401k contribution limit for 2022 is already reached. In fact, many prefer IUL over a 401k - period. The table below lists the 2022 contribution limits for 401k, 403b, IRA, Roth 401k, Roth IRA, or SEP. IUL can allow you to keep on setting money aside for retirement even after you have reached your retirement plan's limits for contributions.
The only limit with IUL is the amount of life insurance you can qualify for. It's not necessary that you personally qualify - either for health reasons or for financial underwriting. You may alternatively be able to purchase and own IUL on your spouse, your children, or any other individual that you can establish that you have an "insurable interest" in their longevity. Of course, IUL is a Roth-like vehicle. Premiums are not deductible, but money you take out down the road may be income-tax free. Here are the 2022 contribution limits for various types of retirement plans:
| Type of Plan |
Under 50 |
Over 50 |
| 401k Contribution Limit 2022 |
$20,500 |
$27,000 |
| 403b Contribution Limit 2022 |
$20,500 |
$27,000 |
| IRA Contribution Limit 2022 |
$6,000 |
$7,000 |
| Roth 401k Contribution Limit 2022 |
$20,500 |
$27,000 |
| Roth 403b Contribution Limit 2022 |
$20,500 |
$27,000 |
| Roth IRA Contribution Limit 2022 |
$6,000 |
$7,000 |
| SEP Contribution Limit 2022 |
$61,000 |
$61,000 |
Your max 401k contribution 2022 is not necessarily reduced by any employer matching contribution, although there is a maximum combined contribution limit of $61,000. A traditional 401k or 403b features tax-deductible contributions, along with taxable distributions. The Roth versions of each are not deductible going in, but provide tax-free income on the back end.
IUL provides a number of potential advantages to qualified plans. There are no set limits on contributions. Unlike a 401k, you can play catch-up indefinitely so that only the cumulative contribution limits since inception apply. IUL may return equity-like performance on the upside, but usually the investment component will never suffer a loss. Unlike a 401k, you can access your money anytime and not have to wait until 59 1/2 to avoid a penalty. This is made possible through the loan provisions of the policy. You can even borrow against the policy to make additional contributions, in hopes of creating arbitrage. Some IUL policies will even make your contributions for you if you suffer a long-term disability.
(Back to IUL Table of Contents)
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