Catch-Up Contribution: What It Is, How It Works, Rules, and Limits

What Is a Catch-Up Contribution?

A catch-up contribution is a type of retirement savings contribution that allows people aged 50 or older to make additional contributions to 401(k) accounts and individual retirement accounts (IRAs). When a catch-up contribution is made, the total contribution will be larger than the standard contribution limit.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) created the catch-up contribution provision, thus allowing older workers to set aside more earnings for retirement.

Key Takeaways

  • Catch-ups are permitted for workers aged 50 years and older.
  • For 2022, the catch-up contribution limit for an IRA is an additional $1,000 on top of the annual contribution limit of $6,000. For 2023, the contribution limit is $6,500 (plus the additional $1,000 catch-up contribution).
  • For 401(k) participants, the catch-up contribution limit is $6,500 for 2022, on top of the annual $20,500 contribution limit. The catch-up contribution limit is $7,500 in 2023 on top of the annual $22,500 contribution limit.
  • The IRS allows catch-up contributions for people who also participated in 403(b) and Thrift Savings Plans. For 2023, the catch-up contribution amount for these plans is $7,500.
  • For SIMPLE IRA plan participants, catch-up contributions are $3,000 in 2022 and $3,500 in 2023.

How Catch-Up Contributions Work

Originally, catch-up contributions under EGTRRA were scheduled to expire at the end of 2010. However, the Pension Protection Act of 2006 made catch-up contributions and other pension-related provisions permanent.

Workers can make catch-up contributions to a variety of retirement plans, including the popular employee-sponsored 401(k). Those who do not have an employee-sponsored plan can contribute to a traditional IRA or Roth IRA. Other options include the SIMPLE IRA and Simplified Employee Pension (SEP). It's essential to have one of these retirement plans and begin contributing early, so there is no need to make catch-up contributions later in life.

In addition to offering catch-up contributions, the average plan offers approximately two dozen different investment options that balance risk and reward, according to employee preference. Many fund expenses and management fees have remained level or even declined, making the 401(k) option feasible for more workers. A more widespread understanding of 401(k)s, through education and disclosure initiatives, will continue to boost participation.

You can make IRA contributions up until your federal tax filing date of the following year. However, your contribution must be made before the April filing deadline and is not eligible for extensions.

Catch-Up Contribution Limits

The IRS reviews and adjusts contribution limits each year, primary in consideration for inflation impacts. Below are recent contribution limits for 2022 and 2023.

Plan 2022 Catch-Up Limit 2023 Catch-Up Limit
IRA (traditional or Roth) $1,000 $1,000
401(k) $6,500 $7,500
403(b) $6,500 $7,500
SIMPLE IRA $3,000 $3,500
457 $6,500 $7,500
Thrift Savings Account $6,500 $7,500

Catch-Up Contribution Requirements

The primary eligibility requirement for catch-up contributions is the individual's age. Plan participants 50 years or over at the end of the calendar year are often eligible to make annual catch-up contributions.

Plan participants are limited to contribution catch-up limits. In addition, participants can not contribute more than the excess of the participant's compensation over elective deferral contributions that are not catch-up contributions.

Some plans may have specific eligibility requirements as well. For example, employees with at least 15 years of service may be eligible to make additional contributions to a 403(b) plan in addition to regular catch-up contributions for participants based on age.

Are Catch-Up Contributions Worth It?

For some, catch-up contributions is critical in preserving the ability to retire with financial flexibility. Especially true for individuals who have not been saving for retirement during the life, catch-up contributions may allow some individuals to have tax benefits as they strive to squeeze in retirement savings towards the end of the working career.

How Many Years Can You Do a 401(k) Catch-Up?

Eligible individuals can do a 401(k) catch-up every year as long as they meet contribution requirements. Once the individual has hit their annual contribution limit, they are not eligible for another catch-up contribution until the next year.

Do Employers Match Catch-Up Contributions?

Employer matching for catch-up contributions depends on the terms of the employer's retirement plan. The matching of catch-up contributions is not required or guaranteed.

The Bottom Line

For workers 50 years and older, a major tax benefit is catch-up contributions that shield retirement savings from income tax liability. Each type of retirement account (401(k), IRA, SIMPLE IRA, etc.) have different catch-up contribution amounts. In addition, some may have varying degrees of eligibility or deadlines. In the end, catch-up contributions are a tremendous resource for savers looking for an advantage as they approach retirement.

Correction—Dec. 4, 2022: This article previously listed the IRA annual contribution limits and catch-up contribution incorrectly.

Article Sources
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  1. Internal Revenue Service. "Retirement Topics - Catch-Up Contributions."

  2. U.S. Congress. "H.R. 1836 - Economic Growth and Tax Relief Reconciliation Act of 2001."

  3. Internal Revenue Service. "IRA FAQs."

  4. Internal Revenue Service. "401(k) Limit Increases to $22,500 for 2023, IRA Limit Rises to $6,500."

  5. Congressional Research Service. "Summary of the Pension Projection Act of 2006," Page 12.

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