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Catch Up on Those Catch-Up Contributions

Catch Up on Those Catch-Up Contributions

July 11, 2019

The IRS allows individuals aged 50 and older to make catch-up contributions to retirement plans. These are set amounts you can contribute above and beyond the annual contribution or elective deferral amount your plan allows each year. The premise here is to help older individuals build ample savings for retirement. But, you are eligible to make these additional contributions in the year you turn 50, whether you opened your account as a young adult or later in life.

If you aren’t 50 yet, you may not be too worried about catch-up contributions. If you don’t pay much attention to your retirement plan other than delegating a certain amount of your paycheck each pay period, you may not even be aware that these contributions exist. However, you should educate yourself and plan to utilize this handy provision every year to maximize the earning potential of your retirement plan.


The IRS deems you eligible to make catch-up contributions as long as you turn 50 years of age within the calendar year that your plan year ends. In other words, let’s say you have a 401(k) with a plan year from October 1 through September 30, 2019. As long as you turn 50 any time in 2019, you can start making catch-up contributions of up to $6,000 every year.

Catch-up contribution amounts for different plans

  • Traditional IRA: $1,000
  • Roth IRA: $1,000
  • SIMPLE IRA: $3,000
  • 401(k), 403(b), 457(b) plans: $6,000

Why are catch-up contributions important?

Catch-up contributions allow you to put away more money each year in your retirement plan. Using the 401(k) catch-up contribution amount of $6,000 as an example—if you begin depositing that at age 50, by the time you reach 70, you’ll have socked away an additional $120,000 in your tax-sheltered account. Those funds reap the benefits of compound interest over time, as well as increase the investing power of your plan. Provided the assets bear fruitful returns—you’re looking at the potential of adding significant wealth in the plan above and beyond the returns on your annually contributed funds. If you start as early as age 21, just imagine how extremely significant that compounding value can be over a long period of time.

Your Takeaway

Many younger individuals feel retirement is a lifetime away and some put off saving for retirement until they are older. However, as retirement age nears, those who haven’t saved enough experience more than a little pressure and a lot of stress about how they’ll retire—if they’re able to retire at all. Don’t find yourself in this position! Start saving as early as you can. Once you’re eligible, catch-up contributions present an incredible opportunity to increase the value of your plan. The more you save in your IRA or 401(k) helps ensure you don’t exhaust your funds in retirement.

For complete information on catch-up contributions for all plans, see the IRS Retirement Topics – Catch-Up Contributions.