Contribution Limits for IRAs, 401(k)s in 2022

The Internal Revenue Service (IRS) has announced that contribution limits for 401(k)s, 403(b)s, most 457 plans, thrift savings plans (TSPs), and other qualified retirement plans will rise by $1,000 for 2022, going from $19,500 to $20,500. However, contribution limits for individual retirement accounts (IRAs), whether traditional or Roth, will remain the same at $6,000. In addition, the income qualifications for a Roth IRA and the requirements to have your contributions to a traditional IRA be tax deductible and to claim the saver’s credit have been raised for 2022.

Here’s a summary of the contribution and limitation levels for 2022.

Individual Retirement Accounts (IRAs)

The annual contributions limit for traditional IRAs and Roth IRAs remain the same for 2022: $6,000, with an additional catch-up contribution of $1,000 for those over 50.

Tax-Advantaged Employer Retirement Plans 

Annual contributions to your 401(k)s, 403(b)s, most 457 plans, and TSPs, however, have increased by $1,000 for 2022:

• What you can contribute for 2021—$19,500
• What you can contribute for 2022—$20,500

Traditional IRA Contributions: Earn More and Still Deduct

Generally, contributions to a traditional IRA are tax deductible in the year that you make the contribution. However, if you or your spouse (if you file taxes as married filing jointly) are covered by a retirement plan at work, your contributions may not be deductible, depending on your income.

Today’s good news is that the amount you can earn and still be allowed to deduct these contributions has gone up for 2022. Here are the new phase-out ranges:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is $68,000 to $78,000, up from $66,000 to $76,000.
• For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $109,000 to $129,000 up from $105,000 to $125,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $204,000 to $214,000, up from $198,000 and $208,000.

More Taxpayers Qualify for a Roth IRA

There are many benefits to saving your money in a Roth IRA instead of a traditional one—especially that your distributions at retirement are completely tax free and there are no required minimum distributions (RMDs). However, there are income limitations on who qualifies to have a Roth. These have also been significantly loosened for 2022. Here’s how the IRS describes it:

“The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000. For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.”

You Can Earn More and Take the Saver’s Credit

The saver’s credit (also known as the “retirement savings contributions credit”) allows low- and moderate-income workers to take a tax credit of up to $1,000 for contributions to a traditional or Roth IRA or to an employer-sponsored 401(k), 403(b), SIMPLE, SEP, or 457 plan.

Here’s how it’s changed, according to the IRS: The 2022 income limit for taking this credit rose to $68,000 for married couples filing jointly, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000.

Other Changes to Qualified Retirement Plans

If you are covered by compensation limits or elective deferrals, are a key employee, or may be defined as a highly compensated employee, and you have an employee stock ownership plan, a SEP or SIMPLE IRA plan, or any other retirement provisions covered by the Internal Revenue Code (IRC), the provisions that cover you may also have changed. These determinations are delineated in IRS Notice 2021-61. Consult your tax advisor for further details.

Catch-Up Contributions

If you are age 50 or over, you can increase your contributions to help you save as retirement gets nearer. The extra amounts you can put aside for retirement did not change for 2022.

Catch-up contributions are still:

• $1,000 more per year for a traditional or Roth IRA
• $6,500 more for a 401(k), 403(b), most 457 plans, and a TSP

FAQs

The Bottom Line

These changes should help taxpayers save even more for retirement in 2022. The 2021 limits will prevail for the taxes that you file by April 18, 2022. Remember, though, that you can contribute to your 2021 traditional or Roth IRA as late as the 2022 tax deadline.