Catch-up contributions 

Catch-up contributions are additional contributions to a retirement account that people aged 50 or older can make to their 401(k), 403(b), individual retirement accounts (IRAs), or other retirement accounts. Catch-up contributions can be a valuable tool for individuals nearing retirement age who want to significantly increase retirement savings in the crucial years leading up to retirement.

Contribution limits and age thresholds

The age threshold for catch-up contributions starts at 50 for both 401(k) plans and IRAs. As soon as you start the calendar year of your 50th birthday, you become eligible to start making catch-up contributions. For example, if you turn 50 on December 31, 2025, you can begin making catch-up contributions immediately on January 1, 2025. 

For participants in a 403(b) plan, there is also something known as the 15-year catch-up contribution. This means that if you are an employee with 15 or more years of service with your current employer (and your annual contribution amount to your 403(b) account is not over $5,000 annually), you may be able to contribute an additional $3,000 per year. Please note that not all plans have this option. There is a lifetime maximum “catch-up” of $15,000.

Starting in 2025, there are two tiers of catch-up contributions:

Standard catch-up (age 50+): If you're 50 or older, you can contribute an additional $7,500 beyond the standard $23,500 contribution limit, bringing your total annual contribution limit to $31,000.

Enhanced catch-up (age 60-63): A new provision allows those aged 60 to 63 to make even larger catch-up contributions of up to $11,250 beyond the standard limit, allowing for a total annual contribution of $34,750.

Are catch-up contributions worth it?

For many people, catch-up contributions are indeed worth it. The extra savings can help compensate for years of under-saving or potentially make up for lost ground due to market downturns. Even if you've been diligent about saving throughout your career, catch-up contributions can provide a valuable boost to your retirement nest egg.

In addition to the potential for increased savings, catch-up contributions may also offer tax benefits, depending on the type of retirement account you have. For traditional 401(k)s and IRAs, catch-up contributions are made with pre-tax dollars, which can reduce your taxable income for the year. With Roth accounts, catch-up contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. Plus, the earnings on the Roth contributions are also not taxed if the withdrawal meets certain qualifications. 

Do employers match catch-up contributions?

Employer matching of catch-up contributions varies significantly from one employer to another. Some employers may offer a match on an employee's catch-up contributions, providing an additional boost to their retirement savings. However, some employers may not match catch-up contributions at all.

To determine whether your employer matches catch-up contributions, review your Summary Plan Description or speak with your plan administrator. They can provide you with detailed information on the specific matching policy for catch-up contributions and help you understand how it applies to your situation.