Catch-Up Contribution

Catch-Up Contribution

A Catch-Up Contribution is an additional contribution that individuals aged 50 or older are allowed to make to certain retirement accounts, such as 401(k) plans or Individual Retirement Accounts (IRAs), beyond the standard contribution limits. This provision is designed to help older workers accelerate their retirement savings as they approach retirement age.

For example, in 2023, the standard contribution limit for a 401(k) is $22,500, but individuals aged 50 or older can contribute an extra $7,500 as a catch-up contribution, bringing their total allowable contribution to $30,000 for the year. This feature helps individuals enhance their retirement savings capacity during their peak earning years.