Catch-up Contributions for Your Retirement Plan

Catch-up Contributions for Your Retirement Plan

Key Points – Catch-up Contributions for Your Retirement Plan

• The Power of Catch-up Contributions
• Maxing Out 401(k) Contributions
• Maxing Out IRA Contributions
• A SECURE Act 2.0 Provision That Will Impact Retirement Plan Contributions Starting in 2026
• 4-Minute Read | 23-Minute Watch

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FIGURE 1 – Maxing Out 401(k) Contributions for 10 Years

FIGURE 2 – Maxing Out 401(k) Contributions for 15 Years

What Kind of Impact Would Catch-up Contributions Make?

Figure 1 illustrates the potential for getting an additional $108,649 by age 60 by making full catch-up contributions. The impact of making full catch-up contributions over 15 years would be nearly double that. Figure 2 shows that you would get an additional $203,641 by age 65 by making full catch-up contributions. If you haven’t saved quite as much as you hoped by age 50, it might not be too late if you start making catch-up contributions.

Maxing Out IRA and Roth IRA Contributions

The long-term impact isn’t as substantial, but let’s quickly review IRA and Roth IRA contribution limits for 2024 as well. The maximum contribution is $7,500 if you’re 49 or younger. If you’re 50 or older, you can make a $1,000 catch-up contribution for a total contribution of $8,500.

It’s important to note that there are income limits to contribute to a Roth IRA and deduction limits for traditional IRAs. In 2024, your Modified Adjusted Gross Income must be below $230,000 if you’re married and filing jointly. You’re still eligible to make a partial contribution if your MAGI is between $230,000-$240,000. That phase-out range is $146,000-$161,000 if you’re a single filer.

The traditional IRA deduction limits will depend on if you and your partner have workplace retirement plans. In 2024, you can make a full contribution if your income is less than $123,000 and your partner has coverage. You can still make a partial contribution if your income is less than $143,000.

Let’s say that you want to make a contribution but don’t have coverage from a workplace retirement plan. If your partner still has coverage, you can still make a full contribution if your income is less than $230,000 ($240,000 for a partial contribution).

If you’re a single filer with a workplace retirement plan, your phase-out range will be $77,000-$87,000. There aren’t any income limits to abide by if you’re a single filer without a workplace retirement plan.

Looking Ahead to 2026

We’ll share the retirement plan contribution limits (and catch-up contribution provisions) for 2025 once they’re released by the IRS. But there is something that we want you to be aware of regarding catch-up contributions starting in 2026. If you’re wages are higher than $145,000, all your catch-up contributions must be made to a designated Roth account beginning in 2026.₁ That was a provision of the SECURE Act 2.0.

Roth or Traditional?

Figuring out whether to save to the traditional or Roth side of your 401(k) is an important consideration throughout your career. If your wages are above $145,000 in 2026, that extra $108,649 by age 60 and $203,641 by age 65 after doing full catch-up contributions could be tax-free. You may be required, however, to pay tax on the Roth contribution.

Should You Make These Catch-up Contributions?

If you’re worried about not having enough money to get to and through retirement, make sure you’re taking advantage of the annual catch-up contributions. But before you do that, do you know how much you need to save for retirement?

Some people struggle with knowing when it’s OK to stop saving for retirement and to start spending more. Could you already be saving too much for retirement (therefore not needing to make catch-up contributions) and not even know it?

What’s the point of diligently saving throughout your career if you’re not going to live the life you want to live in retirement? That’s why it’s crucial to work with a team of professionals that could help you with building a financial plan that’s tailored to your financial and life goals. It’s important to understand that financial planning is a series of trade-offs. How will you navigate decisions such as whether to save more for retirement or to take a family vacation?

We shed some light on various retirement planning considerations in our Retirement Plan Checklist. It consists of 30 yes-or-no questions that gauge your retirement readiness and age-and date-based retirement planning timelines.

Retirement Plan Checklist

We’re Here to Help with Making Those Tough Decisions

Trying to determine what’s in your best interest during those series of financial planning trade-offs isn’t always easy to do on your own. So many things—including the ability to make catch-up contributions—can be overlooked during the retirement planning process.

Our team is ready to help you with attempting to navigate those scenarios. If you have questions about catch-up contributions or other retirement planning strategies, start a conversation with our team below.

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Catch-up Contributions for Your Retirement Plan | Watch Guide

00:00 – What are catch-up contributions?
03:20 – How long does it take to accrue $100,000?
05:54 – The power of maximizing 401(k) and catch-up contributions
10:33 – Trade offs 14:31 – SECURE Act 2.0 impact on catch-up contributions
16:37 – Tax Diversification and Roth accounts

Resources Mentioned in This Article

Past Episodes of America’s Wealth Management Show

• 401(k) Savings Are on the Rise
• 5 Factors More Important Than Rate of Return
• Retirement Savings by Age
• 7 Money Lessons I Wish I Learned Sooner
• Short-Term, Mid-Term, and Long-Term Financial Goals
• Transition into Retirement by Following These 5 Steps
• Your Retirement Lifestyle: What Do You Want Your Retirement to Look Like?
• Have I Saved Enough to Retire?
• 5 Signs You’re Saving Too Much for Retirement
• Don’t Retire without Doing These Things First
• Reviewing Your Retirement Checklist
• DIY Retirement Planning: What Can Be Overlooked?
• How Does a Roth IRA Grow?

Articles/Videos

• 401(k) Planning for 2024 and Beyond?
• 2024 401(k) and IRA Contribution Limits
• How Does a 401(k) Work with Michelle Cannan, CPFA™, QKA®, QKC
• Why You Need a Financial Planning Team with Jason Gordo
• Components of a Complete Financial Plan with Logan DeGraeve, CFP®, AIF®
• Planning a Large Family Vacation
• Starting the Retirement Planning Process
• What Is IRMAA? Medicare Income-Related Monthly Adjustment Amount
• Understanding the SECURE Act 2.0 with Ed Slott, CPA
• Revisiting Roth vs. Traditional with Bud Kasper, CFP®, AIF®, and Corey Hulstein, CPA

Downloads

• Retirement Plan Checklist

Other Sources

[1] https://www.schwab.com/learn/story/what-to-know-about-catch-up-contributions