Every year the IRS analyzes the state of inflation which helps drive their decision on the next year’s limits. In 2022, taxpayers can put an extra $1,000 into their 401(k) plans as the IRS recently announced the 2022 contribution limit for 401(k) plans will increase to $20,500. The agency also announced cost‑of‑living adjustments that may affect pension plan and other retirement-related savings next year. Below are some of the key changes:
RETIREMENT PLAN LIMITS
| 2022 Limits | 2021 Limits | |
| 401(k)/403(b)/457(b) Elective Deferrals | $20,500 | $19,500 |
| Catch-Up Contribution (plans other than SIMPLE plans) | $6,500 | $6,500 |
| SIMPLE Plan Employee Deferrals | $14,000 | $13,500 |
| SIMPLE Plan Catch-Up Contributions | $3,000 | $3,000 |
| Traditional and Roth IRA | $6,000 | $6,000 |
| Traditional and Roth IRA Catch-Up Contributions | $1,000 | $1,000 |
Health Savings Accounts (HSA)/HDHP Limits
| 2022 Limits | 2021 Limits | |
| HSA Contribution — Annual Contribution Limit | ||
| Self-Only Coverage | $3,650 | $3,600 |
| Family Coverage | $7,300 | $7,200 |
| Catch-Up Contributions (age 55 or older) | $1,000 | $1,000 |
| High Deductible Health Plan – Minimum Annual Deductible | ||
| Self-Only Coverage | $1,400 | $1,400 |
| Family Coverage | $2,800 | $2,800 |
You’ll notice the contributions limits for Traditional and Roth IRAs remain the same. With that being said, taxpayers can only deduct contributions to a traditional and 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. There are also income limits which dictate your ability to contribute to a Roth IRA. See the changes below:
Traditional IRA income phase-out ranges for 2022 are:
- $68,000 to $78,000 – Single taxpayers covered by a workplace retirement plan
- $109,000 to $129,000 – Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
- $204,000 to $214,000 – A taxpayer not covered by a workplace retirement plan married to someone who’s covered.
- $0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan
Roth IRA contributions income phase-out ranges for 2022 are:
- $129,000 to $144,000 – Single taxpayers and heads of household
- $204,000 to $214,000- Married, filing jointly
- $0 to $10,000 – Married, filing separately
Lastly, as you’re coming into the end of the year, it’s important to have a plan of action for saving in the following year. Working with a financial professional can help to formulate a strategy which is unique to your situation as what’s best for someone else may not be the best fit for you and your plan.
Ben Webster, CFP® and Derek Prusa, CFA, CFP®
Co-Founders and Owners of Aspire Wealth
December 2021 Newsletter
