Your 50th birthday is an important retirement milestone. At this age, you qualify for catch-up contributions, an extra amount that you’re legally allowed to contribute to your retirement accounts.
They allow people who may have gotten a late start on their retirement savings or who have had to delay their contributions for some reason to catch up.
To understand how consequential catch-up contributions can be, consider someone who starts saving for retirement at age 50 by maximizing their 401(k) with catch-up contributions could amass over $1.3 million by age 70 (assuming an 8% annual return), according to research by the American Association of Individual Investors.
These additional dollars, saved in a tax-advantaged retirement account, such as a 401(k) or IRA, can help you sprint toward the finish line.
Catch-up contributions for 401(k)s and other retirement plans
The catch-up contribution limit for employees aged 50 and older in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is $7,500 for 2024.
The 2024 contribution limit for 401(k)s and other retirement plans is $23,000, which means participants who are 50 and older can contribute up to $30,500.
A note for higher earners:
A provision enacted via the Secure 2.0 Act mandates higher earners to make catch-up contributions only in after-tax Roth accounts, starting in 2026. This change applies to employees making catch-up deposits to 401(k), 403(b) or 457(b) plans who earned more than $145,000 from a single company the prior year.
Catch-up contributions for IRAs
The 2024 IRA catch‑up contribution limit for individuals aged 50 and over is $1,000. Therefore, the 2024 annual IRA contribution limit is $8,000 for savers aged 50 or older, as the contribution limit for IRAs is $7,000.
When can you start making catch-up contributions?
You can start making catch-up contributions in the calendar year you turn 50. For example, if you turn 50 on July 1, 2024, you can begin making catch-up contributions starting January 1, 2024.
Things to consider when making catch-up contributions
Of course, putting some extra money aside for retirement may come easy. A savings target of $30,000 per year in a retirement plan is a lofty goal for just about anyone.
So, here are some additional things to consider when making catch-up contributions:
Make sure you have enough money to cover your living expenses and other financial obligations.
Consider your overall retirement savings goals – how much do you really need to save?
Make sure you know the contribution limits for the type of retirement plan you have.
Consider applying any raises, bonuses or tax refunds to your retirement accounts.
Talk to a financial adviser to get personalized advice about whether catch-up contributions are right for you.
Making catch-up contributions can be a great way to boost your retirement savings. If you are eligible, we encourage you to take advantage of this opportunity.