Bigger 401(k) Contributions Coming in 2022

Monday, November 15, 2021

By Sarah Brenner, JD
Director of Retirement Education
Follow Us on Twitter: @theslottreport

The IRS has released the cost-of-living adjustments (COLAs) for retirement accounts for 2022. As expected, due to inflation in the economy, many of the dollar limit restrictions on retirement accounts will increase next year.

For savers looking to max out 401(k) contributions, 2022 will bring higher contribution limits. The salary deferral limit for employees who participate in 401(k) plans, including the Thrift Savings Plan, as well as 403(b) and 457(b) plans, is increased to $20,500, up from $19,500. The catch-up contribution limit remains unchanged at $6,500. Therefore, participants in these plans who are 50 and older can contribute up to $27,000, starting in 2022. The cap on compensation that can be taken into account for calculating retirement plan contributions is increased from $290,000 to $305,000.

The maximum SEP contribution will increase from $58,000 to $61,000. SIMPLE salary deferral contributions will increase as well, going from $13,500 to $14,000 for 2022. The catch-up contribution amount for SIMPLE IRAs remains unchanged at $3,000.

Surprisingly, the IRA contribution limit will remain at $6,000 for the fourth year in a row. The $1,000 IRA catch up contribution is not indexed for inflation. This will again allow those who are age 50 or over in 2022 to contribute $7,000 to an IRA for the year. The phase-out range for savers making contributions to a Roth IRA is increased to $129,000-$144,000 for single filers, up from $125,000-$140,000. For those who are married filing jointly, the income phase-out range is increased to $204,000-$214,000, up from $198,000-$208,000.

Phaseout ranges for active participants in employer plans looking to make deductible traditional IRA contributions have also been increased. For single individuals covered by an employer retirement plan, the phase-out range is increased to $68,000-$78,000, up from $66,000-$76,000. For married couples filing jointly, if the spouse making the IRA contribution is covered by an employer retirement plan, the phase-out range is increased to $109,000- $129,000, up from $105,000-$125,000.  For those not covered by an employer retirement plan but are married to someone who is covered, the phase-out range is increased to $204,000-$214,000, up from $198,000-$208,000.

More details on the COLAs for 2022 can be found at IRS announces 401(k) limit increases to $20,500 | Internal Revenue Service

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