When you’ve hit 50 and really feel behind in your financial savings, you could possibly begin making catch-up contributions to your retirement accounts. For eligible staff, federal guidelines increase the restrict on how a lot an individual can contribute to their tax-advantaged retirement accounts, giving folks ages 50 and older the chance to “catch up” their financial savings earlier than kissing their 9-to-5 goodbye.
How catch-up contributions work
Federal guidelines — in addition to some employer-sponsored retirement plans — set limits on how a lot a person can contribute to a retirement account in a given 12 months. However beginning the 12 months you flip 50, you’ll be able to improve these contributions by an quantity set by the IRS.
So long as you’re eligible, you don’t should do something particular past ratcheting up your contributions. As soon as your annual contributions exceed the traditional restrict, they’re handled as catch-up contributions.
For instance, when you contribute pre-tax earnings to a 401(okay), the IRS means that you can sock away as much as $23,500 in 2025. Individuals age 50 and older can contribute an additional $7,500 as a catch-up contribution. Because of the Safe 2.0 Act, these ages 60, 61, 62 and 63 get the next catch-up contribution of $11,250.
Catch-up contribution limits in 2025 for 401(okay)s and IRAs
Catch-up contributions could also be allowed in these retirement plans.
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Contribution restrict in 2025 |
Catch-up contribution restrict: Ages 50-59, 64+ |
Catch-up contribution restrict: Ages 60-63 |
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401(okay), 403(b), 457(b), profit-sharing plans, and many others. |
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Guidelines and necessities for catch-up contributions
To be eligible to make catch-up contributions, staff should meet sure standards.
Age: Anybody age 50 and older by the tip of the calendar 12 months could make catch-up contributions to an eligible retirement account. You don’t have to attend till the day you flip 50 to extend your contributions. Beginning the primary day of the 12 months during which you flip 50, you’re eligible to make catch-up contributions.
However bear in mind: Catch-up contribution limits differ relying in your age. Staff aged 50 to 59 and 64 or older have a decrease restrict than staff aged 60 to 63.
Retirement plan: Some employer plans impose their very own contribution limits. Catch-up contributions should still be permitted in that case (i.e., contributions that exceed the plan’s restrict are thought-about catch-up contributions). As famous within the desk above, some retirement plans have completely different catch-up contribution limits set by the IRS.
Earnings: Beginning in 2026, excessive earners face new guidelines within the SECURE 2.0 Act of 2022. The regulation states that anybody incomes greater than $145,000 has to place any catch-up contributions right into a Roth IRA, and people contributions have to be on an after-tax foundation. At the moment, the restrict on Roth IRA catch-up contributions is $1,000.
🤓Nerdy Tip
The revenue threshold for the high-earner rule coming on-line in 2026 refers solely to FICA wages (i.e., what’s on your W-2). Somebody with out FICA wages, reminiscent of self-employment revenue, isn’t affected by the brand new Roth requirement.
Must you make catch-up contributions?
When you’re nearing retirement and need to enhance your financial savings, making catch-up contributions to max out your retirement accounts may very well be a sensible transfer. When you’re not sure about how a lot you want for retirement or how you can optimize your retirement financial savings, it may very well be a superb time to speak to a monetary advisor.