IRS increases limits for 401(k) plans to $20,500 for 2022, leaves individual retirement accounts unchanged

Personal finance

MoMo Productions | DigitalVision | Getty Images

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.

Despite rising inflation, the boost wasn’t extended to individual retirement accounts, limiting savings opportunities for the 33% of private industry workers without a workplace plan

The IRA limit for 2022 remains unchanged at $6,000 and hasn’t increased since 2019.

More from Personal Finance:
Last-minute House Democrat plan bumps state and local tax cap to $80,000 through 2030
Billionaires spared big IRA tax bill in latest Build Back Better plan
Democrats put 401(k) and IRA restrictions back into Build Back Better plan

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).

And there are higher income phaseouts to qualify for the retirement saver’s credit or those deducting IRA contributions.

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.

Products You May Like

Articles You May Like

Wayfair hearing may lead to remedial sales tax legislation
Consumer watchdog eyes crackdown on credit card late fees as inflation threatens to increase them
Millennials want to retire early at 59. Here’s how to make that happen
Suze Orman: Series I bonds are the one investment every person should have right now
Gender gaps in retirement readiness and financial know-how persist, despite strides made by women in last 50 years

Leave a Reply

Your email address will not be published.