Catch-Up Contribution
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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. |
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Investopedia explains '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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Do I need to hit my 401(k) contribution limit before I can begin making catch-up contributions?
You generally need to reach the limit established by the plan in order to make catch-up contributions; therefore, if the plan limit is $15,500, you will be able to make catch-up contributions ... -
What types of plans allow catch-up contributions?
Catch-up contributions can only be made to plans with salary deferral features.If you want to make catch-up contributions, you will need to amend your profit-sharing plan to include a salary ... -
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