Many people enter their 50s with a growing focus on long-term financial security. Whether due to increased earnings or a clearer view of retirement, this stage presents a unique opportunity to maximize retirement contributions. To help individuals over 50 strengthen their retirement outlook, the Internal Revenue Service (IRS) allows additional catch-up contributions beyond the standard limits for certain retirement accounts, including 401(k)s. Here, Meghan Hannon, CRPS®, CPFA®, Partner and Head of Retirement Plan Consulting, shares how you can use 401(k) catch-up contributions to strengthen your retirement savings strategy.
What Are Catch-Up Contributions?
Catch-up contributions are additional amounts that workers age 50 years and older are allowed to contribute to retirement accounts beyond the standard annual limits. For 2025, the contribution limit for 401(k) plans is $23,500, with an additional $7,500 allowed as a catch-up, for a total of $31,000 annually. Under a provision in the SECURE 2.0 Act, employees ages 60 through 63 are allowed a higher catch-up contribution limit of $11,250 for a total contribution maximum of $34,750 for qualifying individuals. These figures specifically refer to employee contributions. When factoring employer contributions, the total allowable 401(k) contribution for 2025 is $70,000 for most participants, and $77,500 for those aged 50 and older.
These expanded catch-up contribution limits are designed to help individuals close savings gaps by allowing higher contributions during peak earning years, and the long-term benefit can be substantial. For example, contributing an additional $7,500 annually over 10 years with a 7% return can yield more than $100,000 in additional retirement savings.
Catch-Up Contributions in 2026 under SECURE Act 2.0
Beginning in 2026, individuals who earn more than $145,000 from the same employer in the prior year will be required to make 401(k) catch-up contributions to a Roth 401(k), meaning contributions will be made after-tax but allow for tax-free growth and qualified withdrawals. Until 2026, all individuals aged 50 and older may continue making catch-up contributions to traditional pre-tax 401(k) accounts, regardless of income level. Read more about how these changes may affect high earners.
Strategies to Maximize Catch-Up Contributions
To take full advantage of this opportunity, consider automating 401(k) contributions, including catch-up funds, to ensure consistency in saving habits. If you’re not currently contributing the maximum catch-up contribution amount, gradually increasing contribution percentages over time can make reaching the full limits more manageable. Reviewing your budget is also a key strategy to meet these contribution maximums. Small changes in discretionary spending can free up funds to redirect into your retirement accounts. Whether it’s reducing entertainment expenses, dining out less frequently or trimming unused subscriptions, even modest reallocations can have a significant impact over time.
Making the Most of Your Catch-Up Contributions
If your employer offers a matching contribution to your 401(k), be sure to take full advantage of it. Matching dollars increase your savings without any extra contributions and compound over time. You may also want to consider the potential advantages of Roth options like a Roth 401(k). These accounts provide after-tax growth and tax-free withdrawals in qualifying retirement, which may be particularly beneficial if you anticipate being in a higher tax bracket later on. Finally, working with a financial advisor can help you evaluate your options, adjust your strategy based on evolving legislation and stay aligned with your long-term goals.
Closing the Savings Gap Before Retirement
Catch-up contributions to your 401(k) provide an important opportunity for individuals age 50 and older to strengthen their retirement savings strategy. With proper planning, these additional contributions can significantly improve your retirement readiness and help close any gaps in your savings. Connect with us to learn more about maximizing your 401(k) catch up-contribution limits, aligning your earnings with your long-term goals and taking advantage of the expanded limits under SECURE Act 2.0.
This material is for informational purposes only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss.
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