Personal Finance, Social Security, Tax Planning

Changes to Retirement Plan Maximums and Social Security Benefits for 2022

by Alli Thomas

Dec 29, 2021

You may already know that the IRS and the Social Security Administration update various guidelines each yearHere’s a round-up of the most important changes to retirement plan maximums and Social Security Benefits for 2022:

Retirement Plan Maximums

401(k) Plans

The maximum 401(k) contribution in 2022 will be $20,500 for workers who are younger than 50. 

Those who will be age 50 or older in 2022 may contribute an extra $6,500 as a “catch-up” for a total maximum of $27,000. 

Traditional IRA

The contribution limit for traditional IRAs in 2022 is unchanged from 2020. 

If you’re under age 50, you may contribute up to $6,000. If you’ll be 50 or older in 2021, you may make an additional $1,000 “catch-up” contribution to your IRA.

What if I’m eligible to contribute to a 401(k) plan through my job?

If you’re single and expect to earn more than $78,000 in 2021 (or you’re married filing jointly and expect to earn more than $129,000), you won’t be able to claim a tax deduction for traditional IRA contributions in 2021. But you’ll still enjoy the tax-deferred growth in your IRA. 

And don’t forget that there’s an earnings phase-out for the deduction. These phase-outs are based on modified adjusted gross income (MAGI). For individuals, it’s more than $68,000; for couples, it’s more than $109,000. 

Finally, if only one half of a married couple is eligible to contribute to a 401(k) plan through their job, the IRA tax deduction will be phased out if their joint income is between $204,000 and $214,000 in 2022. 

Roth IRA

Like the traditional IRA, the Roth IRA contribution maximum in 2022 will remain unchanged. If you’re under age 50, the limit will be $6,000. If you’re 50 or older in 2022, you can contribute an additional $1,000 as a catch-up. 

The Roth IRA income limit in 2022 for individuals will be $144,000. For couples, it will be $214,000. 

There’s also a phase-out for Roth contributions that is based on MAGI. If you’re single or head of household, the phaseout begins at a MAGI of $129,000. If you’re married filing jointly, the phaseout begins at a MAGI of $204,000. 

Changes to Social Security Benefits

There are a number of changes coming in 2022 to Social Security benefits. 

  • The 2022 cost-of-living adjustment (COLA) for Social Security benefits will be 5.9%. 
  • The full retirement age (FRA) will increase by two months to 67 years and ten months for those born in 1960. 
  • The Social Security wage base will increase by $4,200 to $147,000. 
  • The retirement earnings cap for filers who started taking benefits before full retirement age will be $19,560 in 2021. If you reach full retirement age in 2021, you may earn up to $51,960 before the Social Security Administration (SSA would withhold a portion of your monthly benefit. As always, once you’ve hit full retirement age (even if you began taking benefits early), there is no cap on earnings and any benefits that the Social Security Administration withheld in prior years will be added to your monthly benefit amount. 

Are you ready for these changes? Hopefully you are! If your retirement savings strategy for 2022 is already plotted, you can get a free second opinion of it from our financial advisors. Click here to set up a no-obligation meeting with one of them today.

Request a no-cost, no-obligation advisor consultation today!

Get Started

Share this article

Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

Comments are closed.