11/4/2021
Candace J. Dixon
The Internal Revenue Service announced that the amount individuals can contribute to their 401(k) plans has increased to $20,500 in 2022, up from $19,500 for 2021 and 2020.
They also issued technical guidance regarding the cost of living adjustments (COLA) affecting dollar limitations on pension plans and other retirement-related items for tax year 2022 in Notice 2021-61.
Highlights of Changes for 2022
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increased to $20,500, up from $19,500.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2022.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. The deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income if either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work during the year. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.)
The Phase-out Ranges for 2022
$68,000 - $78,000 for single taxpayers covered by workplace retirement plans, up from $66,000 - $76,000
$109,000 - $129,000 for married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, up from $105,000 - $125,000
$204,000 - $214,000 for IRA contributors not covered by a workplace retirement plan and married to someone who is covered, up from $198,000 - $208,000
$0 - $10,000 for married individuals filing separate returns who are covered by a workplace retirement plan, the phase-out range is not subject to COLA and remains unchanged
The income phase-out range for making contributions to a Roth IRA:
$129,000 - $144,000 for singles and heads of household, up from $125,000 - $140,000
$204,000 - $214,000 for married couples filing jointly, up from $198,000 - $208,000
$0 - $10,000 for married individuals filing separate returns who make contributions to a Roth IRA, the phase-out range is not subject to COLA and stays the same
The income limits for the Saver’s Credit (also known as the Retirement Savings Contributions Credit):
$68,000 for married couples filing jointly, up from $66,000
$51,000 for heads of household, up from $49,500
$34,000 for singles and married individuals filing separately, up from $33,000
The amount individuals can contribute to SIMPLE retirement accounts:
$14,000, up from $13,500
Key Employee Contribution Limits Remaining Unchanged
The limit on annual contributions to an IRA remains unchanged at $6,000
IRA catch-up contribution limits
$1,000 for individuals 50 and over - not subject to COLA and is unchanged
$6,500 for employees 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, unchanged
Participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan aged 50 and older can contribute up to $27,000 starting in 2022
$3,000 for employees 50 and over who participate in SIMPLE plans, unchanged
Details on these and other retirement-related cost-of-living adjustments for 2022 are in Notice 2021-61: 2022 Limitations Adjusted as Provided in Section 415(d).