2022 Contribution Limits

Observant1

The contribution limit for 401k/403b/457 plans will increase from $19,500 in 2021 to $20,500 in 2022.
The catch-up contribution limit remains $6,500.

Contribution limits and catch-up contribution limits for Traditional/Roth IRAs are unchanged at $6,000 and $1,000 respectively.

HSA contribution limits for single coverage will increase from $3,600 in 2021 to $3,650 in 2022.
HSA contribution limits for family coverage will increase from $7,200 in 2021 to $7,300 in 2022.
The catch-up contribution limit is unchanged at $1,000.

Refer to the article for additional contribution/income limits.

Link

BennyB

Darn, I wish theyd raise the limit for a Roth account!!!

Observant1

Me too!

Sven

Roth IRA used to have $2,000 limit when it started in 1998. Many people don’t have jobs with 401K) and 403(b) plans. How can one save enough for retirement with $6,000 and 1,000 catch-up, per year?

rforno

Sven said:

Roth IRA used to have $2,000 limit when it started in 1998. Many people don’t have jobs with 401K) and 403(b) plans. How can one save enough for retirement with $6,000 and 1,000 catch-up, per year?

Agreed. I think it's IRAs are joke compared to 4XX-type employer plans. Similarly, 4XX plans are a joke in that there are limits ... frankly if you make < 200K I think you should be able to tuck as much as you want away in a retirement account since if you 'have a great year' you might want to be a 'responsible saver' and tuck a larger amount away during your boom times.

Observant1

Sven said:

Roth IRA used to have $2,000 limit when it started in 1998. Many people don’t have jobs with 401K) and 403(b) plans. How can one save enough for retirement with $6,000 and 1,000 catch-up, per year?

I converted my small Traditional IRA (~ $35K) to a Roth IRA in 1998.
I've been very fortunate that the Roth IRA has increased in value considerably since 1998.
However, the Roth by itself would not provide for a comfortable retirement.
Thankfully, I also have access to 401k and HSA plans.
It would be beneficial to have a retirement plan similar to the Thrift Savings Plan (TSP) universally available for employees without access to traditional 401k/403b plans (often employees at smaller companies).

Sven

Agree. Also the company matching also helps quite a bit, sometime in the range of 4% or more. By the time I entered the work force, define pension plan already disappeared. So the burden of saving for retirement was on the workers who have to learn from the ground up while assuming all the risk of black swans. Fund Alarm and MFO have been a great contributor to education myself in investing.

msf

Sven said:

Roth IRA used to have $2,000 limit when it started in 1998. Many people don’t have jobs with 401K) and 403(b) plans. How can one save enough for retirement with $6,000 and 1,000 catch-up, per year?

"Fifteen percent of households in the labor force without employer-sponsored pensions indicated owning an IRA in 2019."

Congressional Research Service, Individual Retirement Account (IRA) Ownership: Data and Policy Issues, Dec 9, 2020.
https://crsreports.congress.gov/product/pdf/R/R46635/3

So for the vast majority of people without jobs offering 401(k)s or 403(b)s, the size of the IRA contribution limit makes no difference.

If the concern is in encouraging the 75% of households (ibid) who do not have any IRAs to save for retirement, I might suggest better publicizing the Savers Credit and making it a refundable credit.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

Observant1

msf said:

"Fifteen percent of households in the labor force without employer-sponsored pensions indicated owning an IRA in 2019."

Congressional Research Service, Individual Retirement Account (IRA) Ownership: Data and Policy Issues, Dec 9, 2020.
https://crsreports.congress.gov/product/pdf/R/R46635/3

So for the vast majority of people without jobs offering 401(k)s or 403(b)s, the size of the IRA contribution limit makes no difference.

A retirement plan for those without access to traditional 401k/403b plans could include an automatic enrollment provision to increase participation rates. Vanguard released a study earlier this year which indicates that participation rates tripled in 401k plans with an automatic enrollment feature.
This can be a very useful "nudge".

PDF

msf

I agree opt out programs significantly increase participation rates above that of opt in programs. They may be the most effective way of boosting participation. However there is the danger of unintended consequences for lower income workers that tax credits or some other form of subsidy could mitigate.

From the same report, pp. 24-25:

Authorize Automatic IRAs at the Federal Level
...
Advocates of automatic IRA efforts cite that the coverage gap between workers with and without pension coverage will decrease and that increased savings will reduce the burden on future social assistance programs. In addition, some researchers found that automatic IRAs implemented early on in individuals’ careers could increase retirement income for between two-thirds and one-half of individuals in the lowest quarter of the income distribution at age 70.

Others caution that automatically enrolling lower-income individuals into savings plans may have unintended consequences. For example, increased savings could result in decreased standards of living during working years and could result in disqualification from means-tested governments programs (e.g., losing Medicaid eligibility due to mandatory withdrawals in retirement). One study found that automatic enrollment in retirement accounts may cause increases in auto loans and first lien mortgage balances. Another found that automatic enrollment may not necessarily have large impacts on household net worth over time.