How to Make Catch-Up Contributions to Your Retirement Savings

What is a Catch-Up Contribution?

Catch-up contributions are additional amounts individuals aged 50 or older can contribute to tax-advantaged retirement accounts beyond the standard limits, such as 401(k) catch-up contributions and IRA catch-up contributions. These contributions help older workers boost their retirement savings during peak earning years.

As people live longer and face rising costs in retirement, many find they haven't saved enough. Catch-up provisions allow late savers a second chance to close the gap between their current savings and retirement goals.

• Rising longevity and retirement costs: Longer retirements mean more income is needed to maintain your lifestyle.
• Helping late savers close the gap: Many people reach their 50s with savings below their target, whether due to career breaks, debt, or delayed planning.

Who Is Eligible to Make Catch-Up Contributions?

You must meet certain age and account type requirements to take advantage of catch-up contributions. Here's what to know before adjusting your savings strategy.

Age Requirements

You’re eligible as long as you turn 50 at any point during the calendar year, whether your birthday falls in January or right at the end of December.

Account Type Requirements

Catch-up contributions are allowed in several types of retirement accounts, including:

• Employer-sponsored retirement plans (e.g., 401(k), 403(b), 457 plans)
• Traditional and Roth Individual Retirement Accounts (IRAs)
• SIMPLE IRAs and SIMPLE 401(k)s
• Solo 401(k) for self-employed individuals

Each account offers different benefits based on your employment status, income, and tax planning strategy. For example, Roth IRAs provide tax-free qualified withdrawals, while traditional accounts offer upfront tax benefits by lowering your taxable income.

Exceptions and Considerations

Not all employer-sponsored retirement plans offer catch-up provisions. For self-employed individuals, solo 401(k)s may allow catch-ups, but SEP IRAs do not. Roth IRA catch-ups depend on your income; high earners might explore backdoor Roth strategies.

How Much Can You Contribute as a Catch-Up?

Knowing catch-up contribution limits is crucial for optimizing your retirement savings after age 50. These increased limits can help you achieve your retirement goals, particularly if you're lagging.

Annual Catch-up Contribution Limits

Catch-up contribution limits vary by account and are subject to change annually. For 2025:

• 401(k), 403(b), most 457, and Thrift Savings Plans (TSP): Standard limit is $23,000 + $7,500 catch-up = $30,500 total 1,2,3
• SIMPLE IRA/401(k): Standard limit is $16,500 + $3,500 catch-up = $20,000 total 4
• Traditional and Roth IRAs: Standard limit is $7,000 + $1,000 catch-up = $8,000 total 4

If you have more than one account, you may be eligible to contribute catch-up amounts to each type, but not beyond the individual limits set for each account annually.

How These Limits Adjust for Inflation

The IRS reviews contribution limits annually and adjusts them based on inflation. Catch-up contributions may also rise over time to account for increasing costs. Staying current with IRS announcements ensures you don’t miss opportunities to maximize your savings goals.

How Do Catch-Up Contributions Work & How to Make Them?

Catch-up contributions allow workers age 50 or older to exceed the annual limits for retirement accounts. Extra contributions are tracked separately but grow like contributions—tax-deferred or tax-free, depending on account type. Catch-up contributions start automatically after hitting the limit if your plan permits and your contribution rate is sufficient.

Here's a quick breakdown of how to begin, depending on the type of retirement account you have:

Through a Workplace Retirement Plan

• Adjust your deferral rate: Log in to your retirement portal or talk to HR to increase the percentage of your paycheck directed to your 401(k) or similar plan.
• Double-check plan settings: Some plans require a separate election for catch-up contributions, so ensure you're enrolled correctly.
• Time it with raises: Boosting contributions when you get a raise can help you save more without changing your take-home pay too much.

Through an IRA or Roth IRA

• Automate your contributions: To stay on track, try dividing your yearly goal into smaller chunks—like monthly or even biweekly transfers.
• Mind income limits for Roth IRAs: If you're a high earner, consider a backdoor Roth strategy to contribute indirectly.
• Know your deadlines: IRA contributions for a given year can be made until the tax filing deadline, typically April 15 of the following year.

For Self-Employed Retirement Plans

• Solo 401(k): You can make catch-up contributions as both the employee and employer, offering greater flexibility.
• SIMPLE IRA: If eligible, you can contribute an additional $3,500. Notify your plan custodian and adjust your deposits.
• SEP IRA: These plans don’t allow catch-up contributions, which may limit their effectiveness if you’re trying to ramp up savings quickly.

Whether using a workplace plan or managing your accounts, limit. Small increases to your contribution rate now can lead to meaningful gains by the time you retire.

Benefits of Making Catch-Up Contributions

• Helping Boost Retirement Readiness: An extra $1,000 to $7,500 annually can increase your retirement savings, helping you to potentially reach your goals.
• Potential Tax Advantages: Catch-up contributions lower taxable income immediately and defer taxes until withdrawals, potentially reducing your tax rate during high-income years.
• Compound Growth Opportunity in Final Working Years: Are you earning more in your 50s and 60s? These are ideal years to save aggressively. Catch-up contributions maximize compounding potential.
• Helps Offset Gaps in Contribution History: Catch-up provisions help rebuild savings momentum after career changes, caregiving, or life events.
• Flexibility Across Multiple Accounts: In the same year, make catch-up contributions to a 401(k), IRA, and SIMPLE IRA to your savings strategy for your financial situation and goals.
• Strengthens Retirement Planning for Couples: If eligible, both spouses can individually contribute the maximum catch-up amount, doubling your household’s catch-up potential.
• Aligns Contributions With Retirement Timeline: Catch-up contributions help boost your savings toward retirement, whether retiring at 60 or planning to work longer, providing a targeted way to increase savings.

Potential Drawbacks to Consider

• Reduced Take-Home Pay: Rising contributions reduce paycheck money. Evaluate your budget and consider existing expenses, debts, or cash flow limitations before adjusting.
• Investment Risks Still Apply: Retirement accounts face market risks despite more contributions. Increasing contributions later means less time to recover losses. Ensure your asset allocation matches your risk tolerance and retirement plans.
• Not a Substitute for Early Planning: Catch-up contributions are helpful but can't replace early savings benefits. They should supplement a steady savings plan, not serve as a backup.
• May Not Be Ideal for Everyone: Prioritizing retirement contributions may not suit those with high-interest debt, expense struggles, or no emergency fund. Consider a balanced financial strategy.
• Complexity With Multiple Accounts: Managing multiple retirement accounts requires careful attention to deadlines and limits. Consider working with a financial advisor to avoid mistakes.
• Possible Income Restrictions: High earners might not qualify for Roth IRA contributions, including catch-ups. Alternatives like the backdoor Roth require extra tax planning and aren't suitable for everyone.

How Catch-Up Contributions Compare to Other Strategies

Use catch-up contributions to bridge your savings gap. They work best alongside other financial strategies. Here's how they compare to other options to consider.

Maxing Out Earlier vs. Catching Up Later

Starting to save early allows more compounding and growth. Later catch-up helps but offers limited growth time. If you're earning more now, using up contributions accelerates your savings.

Tax-Loss Harvesting, HSA Savings, and Other Late-Stage Strategies

Higher-income earners may benefit from combining catch-up contributions with other tax-advantaged accounts:

• Health Savings Accounts (HSAs): These accounts offer triple tax advantages and can be used for healthcare costs in retirement.
• Tax-loss harvesting: Involves selling underperforming investments to offset capital gains and reduce taxable income.
• Roth conversions: Converting traditional IRA funds to a Roth IRA in lower-income years can reduce your future tax burden.
• Charitable giving strategies: Donating appreciated securities or using Qualified Charitable Distributions (QCDs) from IRAs can help reduce required minimum distributions (RMDs).

Role of Guaranteed Income Sources (e.g., Annuities)

Consider using annuities if you're behind on savings. They offer lifetime income to supplement Social Security or pensions and can help cover essential retirement expenses, even though they aren't suitable for everyone.

Adjusting Asset Allocation

Before adding catch-up contributions, review your investment approach. Make sure your portfolio reflects your age, comfort with risk, and how close you are to retiring. Moving toward a more conservative mix could be a wise move as you approach that point.

Coordinating With Spousal Contributions

Coordination of retirement contributions and tax strategies strengthens a married couple's financial goals. One spouse can focus on catch-up contributions while the other uses a Roth conversion strategy.

General Tips for Catching Up on Retirement Savings

Starting late on retirement savings? You can still catch up—prioritize saving, cut expenses, and maximize time before retirement.

• Reassess your budget: Identify discretionary expenses to cut. Dining out, subscription services, and luxury items are good places to start.
• Increase your savings rate annually: Commit to automatic increases when you get raises or bonuses to grow your contributions over time.
• Delay retirement if possible: Working a few more years can help boost your retirement savings and future Social Security benefits.
• Downsize your lifestyle: Consider relocating to a more affordable home, refinancing your mortgage, or reducing recurring costs like car payments or utilities.
• Take advantage of windfalls: Tax refunds, bonuses, or inheritances can be directed toward retirement savings instead of short-term spending.
• Avoid new debt: Minimize high-interest loans or credit card balances to free up more cash for long-term goals.
• Use catch-up contributions wisely: Max out contributions to employer-sponsored retirement plans and IRAs if eligible.
• Work with a financial professional: Personalized investment advice helps align your financial situation with your retirement savings goal and ensures you're making the most of catch-up opportunities.

Final Thoughts

Individuals over 50 can help boost their retirement savings if they choose to. A financial professional can help evaluate catch-up options, considering taxes, income, and goals. Integrating catch-up contributions into a tailored financial strategy is beneficial.

   Use catch-up contributions to help build a more secure retirement savings after age 50. Start Your Free Plan  

Sources

1. Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits.
2. Retirement Topics - 403(b) Contribution Limits. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-403b-contribution-limits.
3. Contribution limits. https://www.tsp.gov/making-contributions/contribution-limits/.
4. 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000. https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000.