What are the 401(k) Contribution Limits for 2022?

The contribution limit is higher for 2022. Here’s what to know about growing your retirement savings in a 401(k).

Written by Erin Gobler / March 7, 2022

Quick Bites

  • The 401(k) contribution limit for 2022 is $20,500, up from $19,500 in 2021.
  • If you’re age 50 or older, you’re allowed a catch-up contribution of an additional $6,500 per year.
  • You can contribute to more than one 401(k) plan, but the $20,500 limit applies to all of your accounts combined.
  • Other ways to save for retirement in a tax-advantaged way include a traditional IRA, Roth IRA, spousal IRA and a health savings account (HSA).

The employer-sponsored 401(k) plan is one of the best ways to save for retirement, thanks to the short- and long-term tax advantages, the high contribution limits and the potential for an employer match.

As an employee, you can contribute up to a certain amount of your salary each year. These contributions are pre-tax, meaning they reduce your taxable income. They also grow tax-deferred until you withdraw the money during retirement.

What’s even better is that more than half of companies that offer a 401(k) plan also offer a matching contribution, meaning if you contribute to your own 401(k) plan, your employer will match it, usually up to a percentage of your salary.[1]

But the IRS also limits the amount you can contribute to your 401(k) plan each year. So, if you’re planning to save for retirement with this type of account, it’s important to understand how much you can contribute, as well as some of the other ways to save for retirement in addition to your 401(k).

Inside this article

  1. 2022 401(k) contribution limits
  2. Contributing to multiple 401(k)s
  3. Maxing out your 401(k)
  4. Other ways to save

401(k) contribution limits for 2022

In 2022, the IRS allows you to contribute up to $20,500 to your 401(k) plan, up from $19,500 in 2021. If you’re 50 or older, you’re also allowed what’s called a catch-up contribution. You can contribute an additional $6,500 per year to your 401(k) plan, with a total allowable contribution of $27,000 in 2022. These catch-up contributions allow those nearing retirement age to save more aggressively.

What’s more, if your employer contributes to your 401(k) plan, their contributions don’t count toward your annual contribution limit. In fact, between you and your employer, the combined contribution limit is $61,000 for 2022 (or 100% of your salary, whichever is lower).[2]

Can you contribute to more than one 401(k) plan?

In some cases, you may have the opportunity to contribute to more than one employer-sponsored retirement plan in a year. It could be that you switch employers throughout the year, that you have more than one job that offers a retirement plan or that your employer offers more than one type of plan.

The good news is that there’s nothing that prevents you from contributing to multiple 401(k) plans. The not-so-good news is that your allowable contributions don’t change. You can contribute up to $20,500 total to your retirement accounts.

Here’s an example from Robert Massa, the managing director of Qualified Plan Advisors (QPA) and a retirement expert with more than 25 years of experience in the industry: If you work for Company X from January 1 to June 30, 2022, and contribute $15,000 to Company X’s 401(k), you can only contribute $5,500 (or $12,000 for those age 50 or over) for the rest of the year in another employer’s 401(k).

Tip: The new $20,500 limit for 2022 doesn’t just apply to 401(k) plans but also to 403(b) plans, Salary Reduction Simplified Employee Pension (SARSEP) plans and Savings Incentive Match Plans for Employees (SIMPLE) plans.[2]

Maxing out your 401(k)

Even if retirement feels like a long way off, it’s best to start saving as early and as much as possible to ensure a comfortable retirement. And if you’re pursuing early retirement, it’s all the more important that you prioritize retirement savings in your budget.

While any amount you can contribute to your 401(k) plan is better than nothing, some workers choose to max out their accounts to set themselves up for the best financial situation in their older years. Maxing out your retirement account simply means contributing up to the maximum $20,500 per year.

Contributing the full allowable contribution to your 401(k) plan comes with some serious long-term benefits. In fact, if you max out your account for 25 years and get an annual return of 8%, you would retire with more than $1.5 million in your retirement account.[3] But of course, not only is it important to try and max out your 401(k), you also need to be sure your money is invested appropriately for growth and diversification. So be sure you spend time looking at your investment options.

Tip: If you want to max out your retirement account, you can adjust your contributions by contacting your human resources department. Many companies also allow you to adjust your contributions through an online account.

So how much should you contribute to your account each month to max out your account?

By taking the $20,500 contribution limit and dividing it by 12 months, you’ll find you should contribute $1,708.33 per month. If you’re paid twice per month, you would contribute $854.16 per paycheck to max out your account by the end of the year. If you’re paid biweekly, you probably receive 26 paychecks per year. In that case, you would contribute $788.46 per paycheck to reach your goal.

Other ways to save for retirement

A 401(k) plan is a great way to save for retirement, but it’s far from your only option. You might decide to use one of these alternatives either in addition to or instead of your 401(k) plan. Or, if you’ve maxed out your account, your employer doesn’t provide a 401(k) plan or doesn’t offer a match or you don’t like the investment options or fees in your 401(k) plan, you can use these options in lieu of a 401(k).

Traditional IRA

An individual retirement account (IRA) is a type of retirement plan that you manage on your own rather than being offered one through an employer. The IRS allows you to contribute up to $6,000 per year (or $7,000 for those age 50 or older).[4]

Contributions to a traditional IRA are often tax-deductible, just like a 401(k) plan. However, you may not be able to take a deduction if you have a 401(k) through an employer and your income exceeds the IRS limit (which is $78,000 in 2022).[5]

Once you’ve contributed funds to your traditional IRA, the money grows tax-deferred until retirement. Then, when you withdraw funds during retirement, you’ll pay income taxes on your withdrawals.

Roth IRA

A Roth IRA is similar to a traditional IRA, but with a different tax advantage. Rather than receiving a tax benefit on the front end, you’ll receive it at retirement.

With a Roth IRA, you can’t take a tax deduction for your contributions. Instead, you’re contributing with after-tax money. But then the money grows tax-free in your retirement account, and you can withdraw it tax-free during retirement.

Like a traditional IRA, a Roth IRA allows you to contribute up to $6,000 per year (or $7,000 for those age 50 and older). However, you can only contribute the full amount to a Roth IRA if you earn $129,000 or less for single filers. With income from $129,000 to $144,000, you can contribute a reduced amount. If your income is $144,000 or higher, you can’t contribute to a Roth IRA.[6]

Spousal IRA

If you aren’t currently employed, you probably don’t have access to a 401(k) plan and aren’t eligible to contribute to a traditional or Roth IRA because you would need to make at least $6,000 in income a year. But if your spouse has earned income, you can contribute to what’s called a spousal IRA (just remember you must file your taxes as married filing jointly).

A spousal IRA has all of the same rules as a normal traditional or Roth IRA. But instead of contributing based on your own earned income, you’re contributing based on your spouse’s.[4] The deduction rules are the same, meaning that if your spouse has a 401(k) through work and has income higher than $78,000 in 2022, you won’t be able to deduct your contributions.

Health Savings Account (HSA)

While a health savings account (HSA) isn’t technically a retirement account, it comes with serious tax advantages—especially for retirees—that make it well suited to retirement savings.

“HSA contributions are one of the coolest ways to save for retirement that people don't quite understand,” says Massa. “Individual tax filers can save $3,650 in 2022 (or $7,300 for married taxpayers filing jointly) and these dollars are exempt from both federal income taxes and payroll taxes.”

Not everyone can open an HSA, though. You’re only eligible to contribute to an HSA if you have a high-deductible health plan, which is a plan with a deductible of $1,400 or higher for individual coverage and $2,800 for family coverage.[7]

An HSA is a tax-exempt account designed to help you save for medical expenses. Contributions to an HSA are either pre-tax or tax-deductible. Once in your account, the funds grow tax-free, and you can withdraw them tax-free as long as you spend the money on qualified medical expenses.

Funds from an HSA can be used for any qualified medical expenses. The money can also be invested like a 401(k) or an IRA, which is why many use them for retirement savings.

Article Sources
  1. “How America Saves 2021,” Vanguard, https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf.
  2. “Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits.
  3. “Compound Interest Calculator,” SEC, https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator.
  4. “Retirement Topics - IRA Contribution Limits,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits.
  5. “2022 IRA Contribution and Deduction Limit Effect of Modified AGI on Deductible Contributions if You ARE Covered by a Retirement Plan at Work,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/2022-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work.
  6. “Amount of Roth IRA Contributions That You Can Make for 2022,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2022.
  7. “Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans,” IRS, https://www.irs.gov/publications/p969.

About the Authors

Erin Gobler

Erin Gobler

Erin is a personal finance expert and journalist who has been writing online for nearly a decade. Erin’s work has appeared in major financial publications, including Fox Business, Time, Credit Karma, and more.

Full bio
Elaine King

Elaine King CFP®

Elaine has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans.

Full bio

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