traditional IRA

Traditional IRA Contribution Limits for 2022

Once again, retirement savers won’t be able to contribute more to a traditional IRA.

Unfortunately for retirement savers, the maximum amount that you can contribute to a traditional IRA won’t increase yet again for 2022. However, the income ranges for the traditional IRA deduction have ticked up.

2022 IRA Contribution Limits

The maximum amount you can contribute to a traditional IRA for 2022 is $6,000 if you're younger than age 50. Workers age 50 and older can add an extra $1,000 per year as a "catch-up" contribution, bringing the maximum IRA contribution to $7,000. You must have earnings from work to contribute to an IRA, and you can't put more into the account than you earned.

Your 2022 IRA contributions may also be tax-deductible. If you—and your spouse, if married—don't have a retirement plan at work such as a 401(k), you can deduct the full contribution to your traditional IRA on your tax return no matter how much you earn. You have until the federal tax filing deadline to make your IRA contribution for the previous year.

Even if you have a retirement plan through your job, you may still be able to deduct some or all of your contribution depending on your income. For 2022 IRA contributions, the amount of income you can have and still get a full or partial deduction rises from 2021. Singles with modified adjusted gross income of $68,000 or less and joint filers with income of up to $109,000 can deduct their full contribution for the 2022 tax year. Deductions thereafter decrease and phase out completely once income reaches $78,000 for singles and $129,000 for joint filers.

Be aware that you generally must have earned income to contribute to an IRA. But if you're married and one of you doesn't work, the employed spouse can make a contribution into a so-called spousal IRA for the other.

You can open a traditional IRA through a bank, brokerage, mutual fund or insurance company and invest your IRA money in stocks, bonds, mutual funds, exchange-traded funds and other approved investments.

Why Save for Retirement in an IRA?

Traditional IRAs are best for people who are looking for an immediate tax deduction or believe their tax bracket will be lower in the future. For instance, this could include those who will retire soon and believe their income will be less.

Eventually, you will have to pay taxes on your traditional IRA. Your withdrawals will be subject to ordinary income tax. On top of that, if you take the money out before turning age 59 1/2, you can be hit with a 10% penalty. You will also be obligated to take required minimum distributions (RMDs) after you turn age 72, so you won't be able to avoid the IRS forever.

Roth IRAs vs. Traditional IRAs

The tax rules differ for contributions to a Roth IRA, which aren't tax-deductible. Money instead goes into a Roth IRA after taxes have been paid on it, and you can withdraw contributions at any time free of taxes or penalties. The earnings can also be withdrawn tax- and penalty-free once you have owned the Roth for five years and you're at least age 59 1/2. Also, Roth IRAs don't have required minimum distributions. The amount that can be contributed to a Roth IRA is subject to income limits.

If you can afford to contribute the full $6,000 in 2022 without the help of the tax deduction (which reduces the out-of-pocket cost of a $6,000 contribution to just $4,680 for someone in the 22% bracket) you may be better off saving for retirement in a Roth IRA.

One final note: If you invest in both a traditional IRA and a Roth IRA, the total amount of money you can contribute to both accounts can't exceed the annual limit of $6,000 ($7,000 if 50 or older). If you do exceed it, the IRS might hit you with a 6% excessive-contribution penalty.

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