Best Tip for National Retirement Security Week: Catch-up Contributions
Whoo-hoo! It’s National Retirement Security Week. It’s the perfect time to do a reality check on your retirement savings account. For everyone over 50, here’s our biggest tip: Catch-up contributions. If you regret not being as vigilant about saving for your retirement as you should have been, or you’ve decided to up your goals, catch-up contributions could be for you.
Catch-up contributions are just that – an opportunity for people age 50 and older to “catch up” on retirement savings by putting additional money into their retirement plans over and above standard limits.
It’s a fairly straightforward concept, but the IRS has put a few parameters around who can contribute, qualifying plans and how much extra cash can be stashed away yearly:
- Catch-up contributors must be plan participants age 50 or older.
- Most 401(k) plans allow for catch-up. Check to see if your plan has this option.
- IRA plans are eligible for catch-up contributions.
- Annual catch-up contribution limits for 2017 are based on retirement product type:
- In IRA and ROTH IRA plans, eligible participants can contribute up to an additional $1,000 over the plan maximum of $5,500 for annual savings totaling $6,500.
- In Simple IRA plans, eligible participants can contribute up to an additional $3,000 over the plan maximum of $12,500 for annual savings totaling $15,500.
- In 401(k) plans, eligible participants can contribute up to an additional $6,000 over the plan maximum of $18,000 for annual savings totaling $24,000.
Benefits of Catching Up
Setting more money aside for retirement is a personal but smart decision that provides certain advantages. Choosing to make catch-up contributions to your retirement plan:
- Puts you in the best financial position to retire when and how you want to – maybe even earlier than anticipated.
- Allows you to maximize tax deductions related to retirement plan contributions.
Nicholas Crary, CPFA - Financial Services Representative - firstname.lastname@example.org - 800-236-7400 x3381
Nick is a subject matter expert on 401(k), retirement savings, participant advice, small business 401(k), investments, education on options.