What You Need to Know About Increasing the Maximum Contributions to $ 401k
The IRS announced last week that workers will be able to set aside an additional $ 1,000 in their 401 (k) accounts in 2022. The change was made as part of a cost of living adjustment in retirement accounts; although if you have an Individual Retirement Account (IRA) you’re out of luck – the contributions will remain the same at $ 6,000.
Your maximum 401 (k) contribution will (mostly) increase
As part of the IRS’s annual inflation adjustment, workers with 401 (k) , 403 (b) , 457, or Thrift Savings plans can deposit up to $ 20,500 into their accounts in 2022 – $ 1,000 more than in 2021. However, employees over the age of 50 will not receive a break as the additional $ 6,500 contribution limit will remain unchanged in 2022. Also in 2022, the total contribution limit for these accounts will be increased by $ 3,000 to a maximum of $ 61,000 (excluding catch-up contributions).
IRAs will also undergo changes in 2022.
Unfortunately, the maximum contributions for an IRA are not increasing. The limit for 2022 will remain $ 6,000 (or $ 7,000 for those over 50). Additional contributions for people over 50 will also not be adjusted for the cost of living – the maximum amount will remain $ 1,000.
However, it will be easier to qualify for the full Roth IRA contributions. The staged earnings cut increased to a new range of $ 129,000 to $ 144,000 for individual depositors and $ 204,000 to $ 214,000 for joint ventures. (Anyone whose annual income is below these ranges can make a full annual contribution to the Roth IRA.) In addition, employees from the accounting record SIMPLE IRA will have to increase the limit of 500 contributions from 13 500 to 14 000 dollars.
What do you do now?
Most likely very few, unless you are one of the few who maximize their contributions to a retirement plan ( a 2018 report showed that only 8.5% of people actually do this). If you are making the most of your 2022 contributions, you may want to revise your projected retirement savings based on these new limits.
We can expect other changes as well, as the IRS has yet to announce other tax adjustments for 2022, such as updated income tax scales and how much you can deduct as part of a standard deduction from your tax. return. They are expected to rise by about 3% if inflation is high, according to the Wall Street Journal .