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.

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
  1. What are the 403(b) contribution limits?

    The 403(b) contribution limit is determined by an employee's age and years of service. As of 2014, the employee contribution ... Read Full Answer >>
  2. What are the 2014 401(k) contribution limits?

    The limit on elective deferrals to a standard 401(k) plan for 2014 are the same as 2013: $17,500. The catch-up contribution ... Read Full Answer >>
  3. 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, ... Read Full Answer >>
  4. Do I need to hit my 401(k) contribution limit before I can begin making catch-up ...

    You generally need to reach the limit established by the plan in order to make catch-up contributions; therefore, if the ... Read Full Answer >>
  5. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
  6. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>

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