Now You Can Save More for Retirement: 2022 Contribution Limits

The Internal Revenue Service (IRS) has announced that contribution limits for 401(k)s, 403(b)s, most 457 plans, thrift savings plans (TSPs), and other qualified retirement plans will rise by $1,000 for 2022, going from $19,500 to $20,500. For 2023, the limit rises to $22,500.

Contribution limits for individual retirement accounts (IRAs), whether traditional or Roth, are $6,000 for 2022, rising to $6,500 for 2023. In addition, the income qualifications for a Roth IRA and the requirements to have your contributions to a traditional IRA be tax deductible and to claim the saver’s credit have increased for 2022 and 2023.

Here’s a summary of the contributions and limits for 2022 and 2023.

Key Takeaways

  • The Internal Revenue Service (IRS) evaluates and updates qualified retirement account contribution limits each year.
  • The IRS makes adjustments based on increases in the cost of living as measured by inflation.
  • Increases are typically released in October before the new year.
  • Contribution limits for 401(k)s, 403(b)s, most 457 plans, thrift savings plans (TSPs), and other qualified retirement plans rise is $20,500 for 2022, and $22,500 for 2023.
  • The annual contributions limit for traditional IRAs and Roth IRAs is $6,000 for 2022, and $6,500 for 2023. There is an additional catch-up contribution of $1,000 for those over age 50.

Individual Retirement Accounts (IRAs)

The annual contributions limit for traditional IRAs and Roth IRAs remain the same for 2022: $6,000, with an additional catch-up contribution of $1,000 for those over age 50. For 2023, the annual contribution limit rises to $6,500, but the catch-up contribution remains the same at $1,000.

Tax-Advantaged Employer Retirement Plans 

Annual contributions to your 401(k)s, 403(b)s, most 457 plans, and TSPs, increased by $1,000 for 2022, and another $2,000 for 2023.

  • What you can contribute for 2022—$20,500
  • What you can contribute for 2023—$22,500

Traditional IRA Contributions: Earn More and Still Deduct

Generally, contributions to a traditional IRA are tax deductible in the year when you make the contribution. However, if you or your spouse (if you file taxes as married filing jointly) are covered by a retirement plan at work, then your contributions may not be deductible, depending on your income.

The good news: The amount that you can earn and still be allowed to deduct these contributions has gone from 2022 to 2023. Here are the new phaseout ranges:

  • For single taxpayers covered by a workplace retirement plan, the phaseout range is $68,000 to $78,000 in 2022. In 2023, the range is $73,000 to $83,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phaseout range is $109,000 to $129,000 in 2022. In 2023, the range is $116,000 to $136,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is $204,000 to $214,000 in 2022, increasing to $218,000 to $228,000 for 2023.

More Taxpayers Qualify for a Roth IRA

There are many benefits to saving your money in a Roth IRA instead of a traditional one—especially that your distributions at retirement are completely tax free and there are no required minimum distributions (RMDs). However, there are income limitations on who qualifies to have a Roth. These have also been significantly loosened for 2023.

Here’s how the IRS describes it:

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000. For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

You Can Earn More and Take the Saver’s Credit

The saver’s credit (also known as the retirement savings contributions credit) allows low- and moderate-income workers to take a tax credit of up to $1,000 for contributions to a traditional or Roth IRA or to an employer-sponsored 401(k), 403(b), Savings Incentive Match Plan for Employees (SIMPLE), Simplified Employee Pension (SEP), or 457 plan.

Here’s how it has changed, according to the IRS: The 2023 income limit for taking this credit rose to $73,000 for married couples filing jointly, up from $68,000 in 2022. For heads of household, it is $54,750 in 2023, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.

Other Changes to Qualified Retirement Plans

If you are covered by compensation limits or elective deferrals, are a key employee, or may be defined as a highly compensated employee, and if you have an employee stock ownership plan, a SEP or SIMPLE IRA plan, or any other retirement provisions covered by the Internal Revenue Code (IRC), then provisions that cover you also may have changed. These determinations are delineated in IRS Notice 2021-61. Consult your tax advisor for further details.

Catch-Up Contributions

If you are age 50 or older, you can increase your contributions to help you save as retirement gets nearer. The extra amounts that you can put aside for retirement did not change for IRAs, but they did increase for 401(k) plans.

The catch-up contributions are:

  • $1,000 more per year for a traditional or Roth IRA
  • $6,500 more for a 401(k), a 403(b), most 457 plans, and a TSP (increasing to $7,500 for 2023).

Who sets retirement plan contribution limits, and how are they determined?

The Internal Revenue Service (IRS) sets yearly contribution limits for qualified retirement plans. Each year, it looks at increases in the cost of living due to inflation. The limits are not always raised, and they are generally announced in October.

Have the limits gone up for 2022?

Yes and no. Traditional and Roth individual retirement accounts (IRAs) remain capped at $6,000 per year, with a $1,000 catch-up contribution allowed as well. However, tax-advantaged employer-sponsored retirement plans have had their limits raised from $19,500 to $20,500.

What is the saver’s credit?

Also called the retirement savings contributions credit, the saver’s credit is meant for low- and moderate-income workers. It provides a $1,000 tax credit for contributing to a qualified retirement plan. In 2022, the income limit for taking the credit increased to $68,000 for married couples filing jointly, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000.

The Bottom Line

These changes should help taxpayers save even more for retirement in 2022. The 2021 limits will prevail for the taxes that you file by April 18, 2022. Remember, though, that you can contribute to your 2021 traditional or Roth IRA as late as the 2022 tax deadline: April 15, 2022.

Article Sources
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  1. Internal Revenue Service. "401(k) Limit Increases to $22,500 for 2023; IRA Limit Rises to $6,500."

  2. Internal Revenue Service. “IRS Announces 401(k) Limit Increases to $20,500.”

  3. Internal Revenue Service. “Retirement Topics — IRA Contribution Limits.”

  4. Internal Revenue Service. "Publication 590-A (2021), Contributions to Individual Retirement Arrangements (IRAs)."

  5. Internal Revenue Service. “Roth IRAs.”

  6. Internal Revenue Service. “Retirement Savings Contributions Credit (Saver’s Credit).”

  7. Internal Revenue Service. “Notice 2021-61.”

  8. Internal Revenue Service. “2022 Tax Filing Season Begins Jan. 24; IRS Outlines Refund Timing and What to Expect in Advance of April 18 Tax Deadline.”

  9. Internal Revenue Service. “Traditional and Roth IRAs.”

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