Workers can spend more money on their 401 (k) plans in 2022, the Internal Revenue Service said Thursday.
The employee contribution limit for 401 (k) plans will be increased to $ 20,500 next year, an increase of $ 1,000 from this year’s maximum of $ 19,500. The higher limit also applies to employees on 403 (b), most 457, and thrift savings plans, the IRS said. Other basic limits, such as the additional catch-up contribution of USD 6,500 for people over 50 years of age, remain unchanged.
According to a congressional research service, only a fraction of people – around 8.5% – peaked in 2018, putting money into a premium account report.
DEMS REVIVE 401 (K), ROTH IRA LIMITS FOR RICH AMERICANS
The increase is part of an annual cost of living adjustment to reflect inflation. The change therefore does not require legislative approval.
Despite a 30-year high in inflation, the IRS has not increased the contribution ceilings for IRAs and has left the limit unchanged at $ 6,000 for 2022. That number hasn’t changed since 2019. The catch-up contribution amount for IRAs will also remain at $ 1,000. That means anyone 50 and older can raise $ 7,000 next year.
Under the latest changes, more Americans could qualify for Roth IRAs, which pre-tax contributions and allow individuals to grow their investment income tax-free (unless the money is withdrawn before an individual is 59.5 years old).
The most recent income exit from the IRS increases from $ 129,000 for individuals to $ 144,000 and from $ 200,000 to $ 214,000 for married couples filing together.
One in four Americans have no retirement plans, according to a recent report from PwC, a professional services network. The report found that all U.S. households for those ages 25 to 64 have a massive retirement deficit, with total savings of $ 3.68 trillion less than they should to be prepared.
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Research by the Federal Reserve suggests that the median retirement account balance in the U.S. was only $ 65,000 in 2019.