New retirement savings account contribution limits for the 2022 tax year are out! The US Treasury Department has released adjustments to reflect inflation increases. These are the new contribution limits so you can plan accordingly for the 2022 year and make the most out of your retirement savings. 

In a nutshell limits on employer-sponsored retirement savings plans had a boost in contribution limits. While contribution limits for individual IRAs have remained unchanged, though income limits for participating in Roth IRAs have been raised, along with income limits on taking the Saver’s Credit. You can find the official IRS notice here, or see the breakdown below. 

Employer Sponsored Plans

401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan, have increased employee contribution limits by $1000, raising the new contribution limit on employer sponsored retirement plans to $20,500 per year. 

IRA Contribution Limits

IRAs on the other hand remain stuck and have seen no change in four years. Traditional IRAs, Roth IRAs, or a combination of the two remain the same at $6000, with catch-up contributions for those 50 years or older being able to contribute an additional $1000 per year. 

Traditional IRA Deduction Limits

What has changed with IRAs are the income limits to qualify for deducting contributions. At a certain income threshold deductions begin to phase out until the earnings are too high and the deduction can no longer be taken. 

These are the 2022 AGI income ranges when IRA deductions are phased out and then eliminated. Note, however even if you no longer can claim the deduction, non-deductible contributions can still be made. 

Single or Head of Household the amount of deduction begins to reduce or “phase-out” with an AGI of $68,000 and at an AGI above $78,000 you no longer qualify for the deductions.

Married Filing Jointly if the person contributing to the IRA also has a workplace retirement plan the phase-out begins at $109,000 and deductible contributions are eliminated above $129,000 AGI. If one spouse has an IRA and the other is covered by a workplace retirement plan the phase-out begins at $204,000 and ends above $214,000. 

Roth IRA limits

Limits to participating in a Roth IRA have been bumped up by few thousand this year. However, if your income exceeds the amount to participate in a Roth IRA, a back door approach is to invest into a traditional IRA and then roll it over into a Roth IRA.

Single or Head of Households. Roth IRA contributions begin to phase out at $129,000 and once earnings exceed $144,000 contributions to a Roth IRA are no longer allowed. 

Married Filing Jointly. The income phase-out begins at $204,000 and contributions are no longer allowed when earnings surpass $214,000.

Self Employed and Small Business owners

Popular retirement savings for the self employed are Solo 401(k)s and SEP IRAs because they allow for larger retirement savings than a traditional IRA or Roth IRA with a $6000 annual contribution cap. The contribution limit for both a SEP IRA or Solo 401k increased from $58000 to $61,000 in 2022. 

Tax Credit 

Additional changes were made to the saver’s credit, also known as Retirement Savings Contribution Credit, which has bumped up the qualifying income limit. Income limits below these thresholds qualify for the Savers Credit: 

Singles $34000

Head of Household $51,000

Married Filing Jointly $68000. 

Plan for a Healthy Retirement

If you’ve been saving for retirement, but have a nagging feeling that it might not be enough to sustain your desired lifestyle in the future, then now is a great time to reconsider your savings strategy with the new contribution limits in mind. Taking steps like maxing out contributions to the extent you can afford and reaping the benefits of compounding interest over time, you too can have a healthy nest egg for when those golden years arrive. We know these changes can feel daunting at first glance; but with a knowledgeable financial advisor, a solid strategy can be made for you.