Workers may funnel more money into 401(k) plans next year, according to the latest cost-of-living adjustment from the IRS.
The employee contribution limit for 401(k) plans is increasing to $20,500 in 2022, up from $19,500, and catch-up deposits for savers 50 and older will still be $6,500. The new amounts also apply to 403(b), most 457 and Thrift Savings Plans.
The IRA limit for 2022 remains unchanged at $6,000 and hasn’t increased since 2019.
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However, more Americans may now qualify for Roth IRA contributions, with income phaseouts rising to $129,000 to $144,000 for single savers ($204,000 to $214,000 for couples filing together).
The changes come as many Americans face retirement insecurity. Although many have savings shortfalls, only 8.5% of workers maxed out company retirement plans in 2018, according to a report from the Congressional Research Service.