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
  1. Can catch-up contributions be matched?

    Learn about how the specific terms of your retirement savings plan dictate how and when your employer may match your catch-up ... Read Answer >>
  2. What are catch-up contributions for Health Savings Accounts (HSAs)?

    Learn about Health Savings Accounts (HSAs) and how an eligible individual of age 55 or older can make additional catch-up ... Read Answer >>
  3. Who can make catch-up contributions to a Health Savings Account (HSA)?

    Learn about health savings accounts and who can make additional catch-up contributions to HSAs according to the U.S. Internal ... Read Answer >>
  4. What are the 2014 401(k) contribution limits?

    Learn how limitations for 401(k) plans can change; find out what the contribution limits, annual limits and compensation ... Read Answer >>
  5. What are the 403(b) contribution limits?

    Determine whether 403(b) contributions meet federal guidelines. Contribution limits to this retirement plan are determined ... Read Answer >>
  6. 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 Answer >>
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