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Catch-Up Contribution: What It Is, How It Works, Rules, and Limits

By

澳洲幸运5官方开奖结果体彩网:Julia Kagan

Updated November 09, 2024

Reviewed by

Andy Smith

Fact checked by

Yarilet Perez

What Is a Catch-Up Contribution?

A catch-up contribution is a type of retirement savings contribution that allows people age 50 or older to make additional contributions to 澳洲幸运5官方开奖结果体彩网:401(k) accounts and 澳洲幸运5官方开♓奖结果体彩网:individual retirement accounts (IRAs). When a catch-up contribution is made, the total contribution will be 澳洲幸运5官方开奖结果体彩网:large☂r🐽 than the standard contribution limit.

The Economic Growth and Tax Relief Reconciliation Act of🎀 2001🌱 (EGTRRA) created the catch-up contribution provision, thus allowing older workers to set aside more earnings for retirement.

Key Takeaways

Catch-ups are permitted for workers aged 50 years and older.
The catch-up contribution limit for an IRA is an additional $1,000 on top of the annual contribution limit in 2024 and 2025. The contribution limit is $7,000 in 2024 and 2025 plus the additional $1,000 catch-up contribution.
The catch-up contribution limit for 401(k) participants is $7,500 for 2024 and 2025 on top of the annual $23,500 contribution limit.
The IRS allows catch-up contributions for people who also participated in 403(b) and Thrift Savings Plans. The catch-up contribution amount for these plans is also $7,500 in 2024 and 2025.
Catch-up contributions to SIMPLE IRA plans are $3,500 in 2024 and 2025.

How Catch-Up Contributions Work

Originally, catch-up contributions under EGTRRA were scheduled to expire at the end of 2010. However, the Pension Protection Act of 2006 made catch-up contributions and other pension-related provisions permanent.

Workers can make catch-up contributions to a variety of retirement plans, including the popular employer-sponsored 401(k). Those who do not have an employer-sponsored plan can contribute to a 澳洲幸运5官方开奖结果体彩网:traditional IRA or Roth IRA. Other options include the 澳洲幸运5官方开奖结果体彩网:SIMPLE IRA and 澳洲幸运5官方开奖结果体彩网:Simplified Employee Pension (SEP). It's essential to have one of these retirement plans and begin contributing ear🍌ly, so there is no need to make catch-up contributions later in life.

In addition to offering catch-up contributions, the average plan offers approximately two dozen different investment options that balance risk and reward, according to employee ওpreference. Many fund expenses and management fees have remained level or even declined, making the 401(k) option feasible for more workers. A more widespread understanding of 401(k)s, through education and disclosure initiatives, will ꦑcontinue to boost participation.

Important

You can make IRA contributions up until your federal 澳洲幸运5官方开奖结果体彩网:tax filing date of the following year. However, your contribution must be made before the April filing deadline and is not eligible for extensions.

Catch-Up Contribution Limits

The IRS reviews and adjusts contribution limits each year primarily to adjust for the impacts of inflation. These are the contribution limits for 2024 and 2025.

Plan	2025 Catch-Up Limit	2024 Catch-Up Limit
IRA (traditional or Roth)	$1,000	$1,000
401(k)	$7,500	$7,500
403(b)	$7,500	$7,500
SIMPLE IRA	$3,500	$3,500
457	$7,500	$7,500
Thrift Savings Account	$7,500	$7,500

Catch-Up Contribution Requirements

The primary eligibility requirement for catch-up contributions is the individual's age. Plan participants 50 years or over at the end of the calendar year are often eligible to make annual catch-up contributions.

Plan participants are limited to contribution catch-up limits. In addition, participants can not contribute more than the excess of the participant's compensation over elective deferral contributions that are not catch-up contributions.

Some plans may have specific eligibility requirements as well. For example, employees with at least 15 years of service may be eligible to make additional contributions to a 403(b) plan in addition to regular catch-up contributions for participants based on age.

Are Catch-Up Contributions Worth It?

For some, catch-up contributions are critical in preserving the ability to retire with financial flexibility. Especially true for individuals who have not been saving for retirement, catch-up contributions ma🅘y allow some individuals to have tax benefits as they strive to squeeze in retirement savings toward the end of their working careers.

How Many Years Can You Do a 401(k) Catch-Up?

Eligible individuals can do a 401(k) catch-up every year as long as they meet contribution requirements. Once the individual has hit their annual contribution limit, they are not eligible for another catch-up contribution until the next year.

Do Employers Match Catch-Up Contributions?

Employer matching for catch-up contributions depends on the terms of the employer's retirement plan. The matching of catch-up contributions is not required or guaranteed.

The Bottom Line

For workers 50 years and older, a major tax benefit is catch-up contributio⛄ns that shield retirement savings from income tax liability. Each type of retirement account (401(k), IRA, SIMPLE IRA) has different catch-up contribution amounts. In addition, some may have varying degrees of eligibility or deadlines. In the end, catch-up contributions are a tremendous resource for save🔥rs looking for an advantage as they approach retirement.

Correction—Dec. 4, 2022: This article was edited from a previous version that provided incorrect information about the IRA annual contribution limits and catch-up contributions.

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