The IRS puts strict limits on how much you can contribute each year to 401(k) plans, IRAs and other retirement funds. But as you edge closer to retirement, you're given a little wiggle room.
Starting at age 50, workers can supersede the mandated limits with what are known as catch-up contributions. How much more you can contribute varies on the type of account and regulations that are regularly updated by the IRS.
If you've hit the half-century mark and want to squirrel more away, catch-up contributions can help. Here's what you need to know.
What are catch-up contributions?
Introduced by President George W. Bush in 2001, catch-up contributions allow employees age 50 and older to make additional deposits into their tax-advantaged retirement savings accounts.
Catch-up contributions may be made to a 401(k) plan, 403(b) plan, a government 457(b) plan, a traditional or Roth IRA, a SARSEP, a SIMPLE-401(k) or a SIMPLE-IRA.
The dollar amount depends on the kind of account and fluctuates with inflation, though it may not change every year. The limit on catch-up contributions for 401(k) plans for 2024, for example, is an additional $7,500 — the same as it was in 2023.
The maximum standard contribution on 401(k) plans in 2024 is $23,000, meaning employees 50 and older taking advantage of catch-up contributions can contribute up to $30,500.
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How catch-up contributions work
For the most part, employees may begin making catch-up contributions starting Jan. 1 of the year they turn 50.
Certain plans may have unique allowances, however: Some 403(b) plans, for example, allow employees who have been with the same company for at least 15 years to increase their contribution limit before turning 50.
More help: How to save for retirement without a 401(k)
Catch-up contribution limits for 2024
A retirement plan may have different catch-up contribution limits, as well, so it's important to see which apply to you.
2024 Catch-up Contributions
| Retirement Plan Type | 2024 Contribution Limit (Individual) | 2024 Catch-up Contribution Limit (Individual) | 2024 Total Contribution Limit for Ages 50+ |
| 401(k) (other than a SIMPLE 401(k)) | $23,000.00 | $7,500.00 | $30,500.00 |
| IRA (Roth and Traditional) | $7,000.00 | $1,000.00 | $8,000.00 |
| SIMPLE IRA | $16,000.00 | $3,500.00 | $19,500.00 |
| 403(b) | $23,000.00 | $7,500.00 | $30,500.00 |
| 457(b) | $23,000.00 | $7,500.00 | $30,500.00 |
Source: IRS.gov
Benefits of catch-up contributions
Catch-up contributions help individuals make up for the years they didn't save enough. By contributing more to your retirement accounts, your money will have more time to grow and take advantage of compounding interest.
You're also decreasing your current taxable income, which could help during tax season.
Depending on what kind of account it is, the money you contribute may be pre-taxed or taxed-deferred, each of which has benefits. Contributions to Roth IRAs are typically made with after-tax money, for example, so your withdrawals are tax-free.
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Bottom line
Catch-up contributions allow workers age 50 and older to put more money into tax-advantaged retirement savings accounts. They should be considered a great opportunity for anyone who wants to super-size their nest egg.
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