An Upside of Inflation? Retirement Savings Limits Are Increasing Too

Time to Read: 4 Minutes

While IRA contribution limits remain unchanged for 2022, the IRS has increased the contribution limits for many retirement savings plans. For 2022, 401(k)s, 403(b)s, most 457 plans, and the Thrift Savings Plan for government employees and the armed services will see an increase to $20,500, from $19,500. The catch-up provision for savers 50 and above remains the same, $6,500, for a total of $27,000.  

Adding to Savings with an IRA  

While the contribution levels for IRA accounts did not increase, the tax deduction phase-out ranges did get a cost-of-living increase.    

For 2022, the maximum IRA contribution limits are $6,000 and, if you are over the age of 50, you can add another $1,000 as a catch-up contribution.  For 2022, the deductibility phase-out ranges are as follows:   

• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000. 
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000. 

Even if you can’t take the tax deduction, putting additional money into an IRA when you’ve maxed out your employer-sponsored plan may still be a terrific way to build retirement savings, without adding to your tax burden. IRA contributions grow tax-free, so you’ll have the benefit of being able to put your money to work without having to worry about capital gains taxes in the account.  Remember that you’re responsible for notifying the IRS that you’ve made an after-tax contribution so make sure to connect with your CPA on the correct way to file.  

The Spousal IRA  

Whether you are eligible to take a tax deduction or not, if one spouse doesn’t have earned income it can make sense to set up a spousal IRA. This is just a regular individual IRA account held in the name of the spouse. The IRS requires income to contribute to an IRA, and the spousal IRA is the exception to that provision. 

Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets wealth management services. Investment advisory services offered through Stratos Wealth Partners, Ltd., a registered investment adviser.  Stratos Wealth Partners and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only; and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.  To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.  Investing involves risk including possible loss of principal. Some of the information contained herein has been obtained from third party sources which are reasonably believed to be reliable, but we cannot guarantee its accuracy or completeness. The information should not be regarded as a complete analysis of the subjects discussed.