Understanding 401(k) contribution limits can be confusing and overwhelming for some. They are, however, essential to know. Below is a breakdown of important contribution limits that help employees determine whether their savings are on track or have an opportunity to catch up. The annual contribution limit is a great goal to keep in mind, and encourages individuals who are able to defer additional funds into retirement savings to take advantage of doing so.
| 2022 | 2021 | 2020 | |
|---|---|---|---|
| Employee Contribution Limit | $20,500 | $19,500 | $19,500 |
| Employee Catch-Up Contribution (For employees aged 50 and over) |
$6,500 | $6,500 | $6,500 |
| Total Contribution Maximum for Defined Contribution Plan | $61,000 | $58,000 | $57,000 |
| Annual Compensation Limit | $305,000 | $290,000 | $285,000 |
| Individual IRA Annual IRA Contribution | $6,000 | $6,000 | $6,000 |
| Individual IRA Catch-Up Contribution | $1,000 | $1,000 | $1,000 |
| Annual Maximum Benefit Under Defined Benefit Plan | $245,000 | $230,000 | $230,000 |
| Highly-Compensated Employee | $135,000 | $130,000 | $130,000 |
| Social Security Wage Base | $147,000 | $142,800 | $137,700 |
| Simple IRA | $14,000 | $13,500 | $13,500 |
| Simple IRA Catch-Up | $3,000 | $3,000 | $3,000 |
2022 IRS TAX SAVERS CREDIT1
Certain employees may be able to take a tax credit for making eligible contributions to the company’s retirement plan. An employee can generally take the credit if they are:
- Age 18 or older;
- Not a full-time student; and
- Not claimed as a dependent on another person’s return.
The amount of the credit is 50%, 20% or 10% of the employee’s retirement plan contributions up to $2,000 ($4,000 if married filing jointly), depending on their adjusted gross income that is reported on their Form 1040 or 1040A. The chart below shows the amount of the credit, depending on adjusted gross income and tax filing status.
| How Much the Credit is Worth | Married Filing Jointly | Head of Household | All Other Tax-Filing Statuses |
|---|---|---|---|
| 50% of your contribution | AGI < $41,000 | AGI < $30,750 | AGI < $20,500 |
| 20% of your contribution | $41,001 – $44,000 | $30,751 – $33,000 | $20,501 – $22,000 |
| 10% of your contribution | $44,001 – $68,000 | $33,001 – $51,000 | $22,001 – $34,000 |
| 0% of your contribution | more than $68,000 | more than $51,000 | more than $34,000 |
For more information, please visit the IRS site.
Questions? Call 800.399.2083 or email retirement@htlfrps.com.
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1For your specific situation, please consult with your tax advisor.
Heartland Retirement Plan Services are offered through Dubuque Bank and Trust Company. The information provided herein is general in nature and is not intended to be nor should be construed as specific investment, legal or tax advice. The factual information has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Heartland Retirement Plan Services makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, it. Products offered through Heartland Retirement Plan Services are not FDIC insured, are not bank guaranteed and may lose value, unless otherwise noted.