Catch-up contributions: How do they work?

Man maximizing his retirement savings through catch-up contributions

Owning a home, raising children, paying for life’s unexpected surprises—it’s easy for your retirement savings to fall short. But, fortunately, it’s never too late to reach your retirement savings goals.

In fact, after age 50, your retirement plan may allow you to make catch-up contributions. These let you make additional contributions, beyond the regular contribution limit, to your IRA or your organization's plan (if applicable) as you near retirement.

Catch-up contribution limits

In 2018, you can make a maximum annual contribution of $18,5001 (in 2019 it increases to 19,000) to your employer’s retirement plan if you’re still working. And if you’re age 50 or older, you may be able to make an additional catch-up contribution of up to $6,000.* 

Common catch-up provisions include:

PlanAnnual contribution limit2Catch-up contribution*,2Total contribution2
Individual retirement account (IRA, traditional & Roth)$5,500$1,000$6,500
SIMPLE** 401(k) & SIMPLE IRA$12,500$3,000$15,500

To be eligible for catch-up contributions in any given year, you first must meet the maximum annual contribution IRS limit, or that for your organization's retirement plan (if it includes a catch-up provision).

Maximize your annual contributions

If you're 50 or older, the catch-up provision can provide a great opportunity to contribute more to your retirement savings. This is especially true if you haven't been able to contribute the maximum amount each year in the past. The pre-tax contributions also allow you to reduce your current taxable income even further.

Calculate your deferral amount

While making catch-up contributions is important, increasing the amount you're saving through a lump sum contribution may not always be easy. Looking ahead, consider increasing your contributions early in the year when you can.

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* Some plans may not allow catch-up contributions to the plan.

** Simple IRA and Simple 401(k) plans are available to employers with 100 employees or less.

1 Contributions are limited to the lesser of plan or the IRS limit as indexed.

2 IRS limit as indexed for 2018.