Catch-Up Contributions
Catch-up contributions are additional amounts that workers age 50 and older (and in some cases age 60-63) may contribute to retirement accounts above the standard annual limit. These extra contributions are designed to help people who may be behind on retirement savings accelerate their progress in the years leading up to retirement.
Catch-up contributions allow eligible workers to save more in their retirement accounts than the standard annual contribution limit. For IRAs (both Traditional and Roth), individuals age 50 and older can contribute an additional $1,000 per year above the standard limit. For employer-sponsored plans like 401(k), 403(b), and governmental 457(b) plans, the catch-up limit for those 50 and older is $7,500 for 2025.
The SECURE 2.0 Act introduced an enhanced catch-up provision starting in 2025 for workers aged 60, 61, 62, and 63, who may contribute the greater of $10,000 or 150% of the standard catch-up amount to employer-sponsored plans. This super catch-up is designed to help those in their early sixties who may have the most urgent need and capacity to boost their retirement savings before leaving the workforce.
One important SECURE 2.0 provision that has generated attention is the requirement that catch-up contributions for employees earning more than $145,000 (indexed to inflation) must be made on a Roth (after-tax) basis in employer plans. This provision, originally set to take effect in 2024, was delayed to 2026 to allow plan administrators time to implement the necessary changes.
Catch-up contributions represent a meaningful opportunity for additional tax-advantaged savings. For someone maximizing both an IRA and an employer plan with catch-up contributions, the total annual deferral could be substantial. Combined with any employer matching contributions, this can significantly accelerate retirement readiness in the final working years.
Why This Matters
The years approaching retirement are often when earnings peak and financial obligations like mortgages or children's education expenses may be decreasing. Catch-up contributions could allow you to direct more of that available cash flow into tax-advantaged retirement savings, potentially making a meaningful difference in your retirement readiness.
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