Catch-Up Contribution

DEFINITION of 'Catch-Up Contribution'

A type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts. The catch-up contribution provision was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), so that older individuals would be able to set aside enough savings for retirement.

BREAKING DOWN 'Catch-Up Contribution'

Originally, the ability to make catch-up contributions under EGTRRA was set to end at around 2011. However, the Pension Protection Act of 2006 made catch-up contributions and other pension-related provisions permanent.

Although using catch-up contributions is a great way for many people to expand their retirement savings, a report from the Vanguard Center for Retirement Research entitled "Catch-Up Contributions in 2004: Plan Sponsor and Participant Adoption" (2004) found that only 13% of eligible candidates use catch-up contributions to expand their savings.

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RELATED FAQS
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    Learn when you can start making catch-up contributions to qualified retirement plans such as 401(k)s, 403(b)s, SIMPLE 401(k)s ... Read Answer >>
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    Learn about how the specific terms of your retirement savings plan dictate how and when your employer may match your catch-up ... Read Answer >>
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    You generally need to reach the limit established by the plan in order to make catch-up contributions; therefore, if the ... Read Answer >>
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