How to Fully Utilize 401(k) Catch-Up Contributions

Image: How to Fully Utilize 401(k) Catch-Up Contributions

There's never a bad time to audit your retirement savings account and make sure there are no major discrepancies between the amount of time you’d like to be retired and the amount of time you can afford to be retired. Maybe you weren’t as diligent about saving for your retirement as you should have been early on or maybe you recently decided to raise your savings goals. Whatever the reason, if you’re over the age of 50 and are further from being retirement ready than you’d like to be, catch-up contributions can help.

Catch-up contributions are exactly that—an opportunity for people aged 50 and older to “catch up” on their retirement savings. The rules allow savers over the age of 50 to put additional money into their retirement savings accounts, over and above the standard limits.

It’s a fairly straightforward concept, but the IRS has put a few parameters around who can contribute catch-up contributions, which retirement plans qualify, and how much extra cash can be stashed away yearly.

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IRS regulations on catch-up contributions

  • Plan participants utilizing catch-up contributions must be aged 50 or older by the last day of the year.
  • Most 401(k) plans allow for catch-up contributions, but participants should be sure to check if their plan has this option prior to contributing any catch-up funds.
  • IRA plans are eligible for catch-up contributions.
  • Annual catch-up contribution limits for this year are based on retirement product type:


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Benefits of utilizing catch-up contributions for retirement savings

Setting more money aside for retirement is a personal, albeit smart, decision that provides certain advantages. Choosing to make catch-up contributions to your retirement fund puts you in a great position to retire when and how you want to—maybe even years earlier than you originally anticipated. Plus, it allows you to maximize tax deductions related to retirement plan contributions while increasing your retirement nest egg and increasing your overall retirement readiness.


To learn more about saving for a financially-secure retirement, visit our Retirement Saving Resources page.