2022 Brings Higher Retirement Account Contribution Limits

Published

December 8, 2021

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IRA News, Investment News

The Treasury Department has announced inflation-adjusted amounts for retirement account savings for 2022. Contribution limits have increased for workplace plans while, contribution limits for Individual Retirement Accounts remain unchanged at 2019 amounts.

401(k)s. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan has increased to $20,500 for 2022 — a $1,000 increase after two years at $19,500. As a reminder, you can make changes to your 401(k) election at any time during the year, not just during open enrollment season.

The 401(k) Catchup. The catch-up contribution limit for employees age 50 or older in these plans remains unchanged at $6,500 for 2022. You can make the additional $6,500 catch-up contribution for the year, even if you don’t turn 50 until December 31, 2022.

SEP IRAs and Solo 401(k)s. For those who are self-employed or small business owners, the amount for SEP IRAs or solo 401(k)s increases from $58,000 in 2021 to $61,000 in 2022. This is based on the amount they can contribute as an employer, as a percentage of their salary. The compensation limit utilized in the savings calculation also increases from $290,000 in 2021 to $305,000 for 2022. 

After-tax 401(k) contributions. If your employer allows after-tax contributions to your 401(k), you can also take advantage of the new $61,000 limit for 2022. This is a cumulative cap that includes the $20,500 salary deferrals and any employer contributions. Catch-up contributions are not included in the cap.

The Simple. The contribution limit for Simple retirement accounts increases from $13,500 in 2021 to $14,000 in 2022. The Simple catch-up limit remains at $3,000.

Individual Retirement Accounts. The limit on annual contributions to an Individual Retirement Account (pretax or Roth or a combination) remains unchanged at $6,000 for 2022. The catch-up contribution limit, which is not subject to inflation adjustments, remains at $1,000. Remember that 2021 IRA contributions can be made until April 15, 2022, and 2022 IRA contributions can be made until April 15, 2023.

Saver’s Credit. The income limit for the saver’s credit for low- and moderate-income workers is $68,000 for married couples filing jointly for 2022, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married filing separately, up from $33,000.

For more information on cost-of-living adjustments to retirement accounts, see the IRS’s release (https://www.irs.gov/pub/irs-drop/n-21-61.pdf).


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