Even though it doesn’t feel like it sometimes, contribution limits are indexed to inflation.

Twelve-month inflation for all items ending in September 2021 has been 5.4%, so it is not surprising that the 2022 contribution limits have seen more increases than normal.

Each contribution limit uses a slightly different formula to calculate the new amounts, so some saw larger increases than others.

As always, we recommend updating your contributions to meet these new maximums.

If you are stretched thin and are thinking, “I can’t afford to save more!” You might appreciate reading our articles “Fund Your Roth IRA Even When You Can’t Afford It” and “How to Convert Taxable Savings Into Your Roth IRA.”

A Roth IRA can actually make a great place to store your emergency fund. Even though it is a retirement account, Roth IRAs have the special provision that you can always withdraw the amount you contributed for any reason and at any age. If you have the free cash, fully funding your Roth IRA is normally the right decision.

Another helpful read might be our Account Funding Priorities series to determine the design of your own savings waterfall plan.

Tax Year 2022

Account Type	Requirements		Contribution Limit	Change from 2021
Traditional or Roth IRA Contribution (subject to phaseouts, limited by wages)	Age 49 and under		$6,000	No change.
	Age 50 and over		$7,000
Employee Elective Deferral 401(k) or 403(b) plans	Age 49 and under		$20,500	+$1,000 to the elective deferral Catch-up contribution stays at $6,500
	Age 50 and over		$27,000
Employee Deferred Compensation 457(b) plans	Age 49 and under		$20,500	+$1,000 to the elective deferral Catch-up contribution stays at $6,500
	Age 50 and over		$27,000
Employee Elective Deferral SIMPLE 401(k) or IRA Plan (with further limitations)	Age 49 and under		$14,000	+500 to the elective deferral Catch-up contribution stays at $3,000
	Age 50 and over		$17,000
SEP IRA Employer Contribution 401(k), 403(b), or 457 plans Employer Contribution	The smaller of:		$61,000 or 25% of compensation	+$3,000 to the limitation for defined contribution plans
Health Savings Account (HSA) Contribution	Single Plan	Age 54 and under	$3,650	+$50 to base single contribution limit +$100 to base family contribution limit catch-up remains at $1,000
		Age 55 and over	$4,650
	Family Plan	Age 54 and under	$7,300
		Age 55 and over	$8,300

 

You can find the current contribution limits here: Account Contribution Limits
and the IRS page on the same topic here: Retirement Topics – Contributions

Featured Image by Melissa Walker Horn on Unsplash