Early in the new year is a good time for individuals to revisit how much they are contributing to their retirement plan. The IRS recently announced the updated 2022 maximum retirement plan contribution limits for 401(k)s and IRAs, which reflect cost-of-living adjustments.
2022 401(k) Contribution Limits
In 2022, employees can contribute $1,000 more to their 401(k) compared to 2021. The 2022 additional catch-up contribution allowed for employees who are 50 years old and over is unchanged from 2021 and remains at $6,500.
401(k) Maximum Employee Contributions
Max Employee (EE) Contribution
EE Additional Catch-Up Contributions (Age 50 or older)
Therefore, employees under 50 years old can contribute $20,500, and employees 50 years or older can contribute a maximum of $27,000 to their 401(k) plan in 2022. This limitation is the same for traditional or Roth 401(k) plan contributions.
Many employers also offer 401(k) matching contributions or 401(k) profit-sharing contributions. Employer contributions do not impact an employee’s allowed contributions outlined above; however, there is a total combined contribution limit. The combined employee plus employer 401(k) contribution limit for 2022 is $61,000 ($67,500 for those 50 or older). That overall limitation is a $3,000 increase compared to 2021.
2022 IRA Contribution Limits
The limit on annual contributions to an IRA remains unchanged at $6,000 for 2022. The additional IRA catch-up contribution for individuals 50 or older, is also unchanged at $1,000. Therefore, individuals under 50 years old can contribute $6,000, and individuals 50 years or older can contribute $7,000 to their IRA in 2022. This limitation is the same for traditional or Roth IRA contributions.
IRA Maximum Contributions
Max Individual Contribution
Catch-Up Contributions (Age 50 or older)
Individuals can deduct contributions to a traditional IRA if they meet certain conditions. If neither the taxpayer nor their spouse is covered by a retirement plan at work, their full contribution to a traditional IRA is deductible. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated. The amount of the deduction depends on the taxpayer's filing status and their income.
A taxpayer’s filing status and income also impacts whether an individual can contribute to a Roth IRA for the year.
Please contact your Schneider Downs advisor if you would like to discuss your retirement planning goals or strategies.
You’ve heard our thoughts… We’d like to hear yours
The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.