What turning 50 means for retirement account limits 

If you’re age 50 or older, you can save more than the typical limit with retirement plan catch-up contributions. Essentially, this allowance from the IRS gives retirement savers the opportunity to make up ground on reaching their financial goals in case they couldn’t save much when you were younger. 

Read on to learn what catch-up contributions are, why they matter, and when you can take advantage of them.  

How do catch-up contributions work? 

Catch-up contributions were introduced in 2001 as part of the Economic Growth And Tax Relief Reconciliation Act. They give people who are age 50 and over, or who turn 50 by the end of the calendar year, a chance to save more in their 401(k)s, IRAs and other retirement accounts.^1,2   

Catch-up contributions are considered elective deferrals, or deposits, an employee makes from their pay into their retirement account that surpass a legal limit, a plan-imposed limit or the actual deferral percentage (ADP) limit for highly compensated employees (HCEs). 

Catch-up contribution limits 

The IRS reviews and adjusts contribution limits each year, primarily in consideration for inflation impacts. Below are recent contribution limits for 2024.³ 

How much total can I save this year? 

Every year, by regulation, the IRS revises how much you can contribute to your retirement plan that year. 

In 2024, for example, if you’re enrolled in a workplace program like a 401(k), a 403(b) or an eligible 457 plan, you can save up to $23,000 for retirement. 

The IRS annual limit for both a traditional IRA and a Roth IRA contributions is $7,000 in 2024. For those with a SIMPLE 401(k) plan, the maximum  deferral amount in 2024 its $16,000.⁴ 

But catch-up contributions provide those age 50 and older with an opportunity to go above and beyond IRS standard thresholds. That means if you’re already 50 or will be 50 later this year, you can contribute a grand total of: 

• $30,500 in your 401(k), 403(b) or eligible 457 plan. 

• $30,500 in a government thrift savings plan. 

• $8,000 in a traditional or Roth IRA. 

• $19,500 in a SIMPLE 401(k) account. 

• $19,500 in a SIMPLE IRA. 

Even if your 50th birthday is December 31, you still qualify to begin making catch-up contributions at any point in 2024.  

Changes to catch-up contributions from 2026 

If you’re a high-income earner, a new rule going into effect in 2026 will change how you can contribute.⁵ Starting in 2026, Americans aged 50 and older will be divided into two groups based on annual income: 

1. Those making less than $145,000 can continue making catch-up contributions to their regular pre-tax 401(k)s.  

2. Those making $145,000 or more will have to make catch up contributions as Roth 401(k) contributions—which means you’ll pay taxes on those contributions now but will get a tax break on the earnings later at withdrawal as long as you’re at least 59½ and you made your first contribution at least 5 years before. 

The rule change was originally set to start in 2024 but has been postponed thanks to a new two-year administrative transition period. The delay gives Americans nearing retirement and earning over $145,000 two additional years to make catch-up contributions on a pre-tax basis. Note that the $145,000 wage limit is tied to inflation and subject to change.

How do I make catch-up contributions? 

The first step to making catch-up contributions is ensuring that your budget can cover them. Take some time to understand your monthly income and expenses. Do you have enough left over to maximize catch-up contributions? 

Once you know how much extra you can put into retirement, set up those contributions. Visit human resources or whoever administers your employer-sponsored plan and ask to change your retirement contribution elections. In most cases, you can do this anytime and even make changes multiple times a year.

If you have a self-directed retirement account, log into your online portal and change your contribution amount. You might also contact your plan administrator or financial advisor if someone is helping you manage your retirement accounts and have them make those changes for you. There are three key factors to keep in mind, however:

1. Some plans set plan-imposed limits on elective deferrals that may be different than IRS-imposed limits. It’s important to understand the rules and details of your specific plan. Also, if you’re a highly compensated employee, you may have different limits as well. 

2. The IRS imposes an overall limit on the amount of combined employee and employer contributions that can be added to your retirement account each year. The maximum cap in a 401(k) in 2024 is $69,000, or $76,500 if you include catch-up contributions (or 100% of your compensation if that value is lower).⁶ 

3. There is a deadline of December 31 to make any contributions, including catch-up contributions, to your employer-sponsored plan for that given year. On the other hand, you can continue adding to your IRA until Tax Day of the following year. So, for 2024, you actually have until April 15, 2025, to make IRA contributions. 

What are the benefits of making catch-up contributions? 

When you were just starting out in your career, you may not have had the same flexibility with your bills and expenses that you do today. Maybe you were preparing for a new baby, saving for a new house, or trying to pay off your student loans. That’s where catch-up contributions come into play. 

They can help you: 

• Boost your nest egg. Above all, by catching up you can focus more on saving for your future and having enough to fund your golden years. Compound earnings also give your money the opportunity to keep growing — and growing — your retirement savings because any potential earnings are reinvested into your account. 

• Reduce your taxable income. Catch-up contributions made on a pre-tax basis are extra savings on top of regular pre-tax contributions. As a result, they could bump you into a lower tax bracket, which means your income would be taxed at a lower rate. 

• Gain ground. Some professionals suggest you’ll need about 80% of your current earnings to cover your cost of living in retirement. Catch-up contributions can help you “make up for lost time” and potentially achieve your desired retirement income. 

What should I do next? 

Saving for retirement is a critical financial step for people of all ages. Starting early and building wealth for the future can be a great way to support peace of mind and a fully funded retirement, but that’s not always possible. Making catch-up contributions is just one of many ways you can prepare for your future, especially as you get closer to retirement. The most important thing, though, is to keep saving as much you can to achieve your goals. As always, it’s a good idea to meet with a financial professional who can help see if you’re on the right track.