Investing & Retirement

IRS Announces 401(k) Contribution Limit Increase for 2022


The Internal Revenue Service has announced that individuals will be allowed to contribute up to $20,500 to their 401(k) plans in 2022, an increase of $1,000.

The government occasionally increases the maximum 401(k) contribution limits due to the increase in the cost of living. The 401(k) contribution limit was at $19,500 in 2020 and 2021.

401(k) Contribution Limit $1,000 Increase

Keep in mind that $20,500 is the total amount you can contribute to your 401(k) across all your accounts — including 401(k) plans at different companies.

Those with SIMPLE IRAs will be able to contribute up to $14,000 in 2022, up from $13,500.

The news release about the changes also says that catch-up contributions for IRAs and 401(k) plans will remain unchanged in 2022. Those limits, which apply to people aged 50 and over, are $1,000 for IRAs and $6,500 for 401(k) plans.

Money expert Clark Howard says your first financial step should be creating an emergency fund. But after that, when you’re ready to invest, the first thing you should do is match your company’s 401(k) contributions, he says.

“The beauty of an employer match is that it’s the equivalent of an automatic pay raise,” Clark says. “No need to ask your boss, get a good quarterly review or hope your company has a good year so there’s money for a raise!”

For most people, increasing your 401(k) contributions up to the maximum allowed is the next step, even ahead of contributing to an IRA, Clark says. If you’re already reaching the max 401(k) contribution limit in 2021, you’ll be able to save an extra, tax-advantaged $1,000 toward your retirement next year.

You can make 2021 401(k) and IRA contributions through April 15, 2022. But remember, if you hit your maximum contribution limit prior to the end of the calendar year, you could lose out on any company match.

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This post was last modified on November 5, 2021 12:35 pm

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