Top 9 Reasons To Make 401(k) Catch-up Contributions

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Catch-up contributions are a great way for older workers to add extra money to their retirement accounts, helping them increase their savings at a critical time. After years of paying for children, a house and other vital expenses, catch-up contributions allow older workers to get back on track in building their nest egg.

Here’s how catch-up contributions work and how they can help you build a better retirement.

What are 401(k) catch-up contributions and who can make them?

Catch-up contributions allow workers with employer-sponsored retirement plans such as a 401(k) or 403(b) to add extra money to their accounts. The catch? You have to be at least 50 years old to make them, meaning you have limited time to do so before you retire.

The standard 401(k) contribution limit in 2025 for workers under the age of 50 is $23,500. The catch-up contribution allows workers to save an additional $7,500 — for a grand total of $31,000 this year.

That’s a lot of money, and this amount could be difficult to save, since it represents more than 25 percent of the annual salary for a worker earning $100,000 per year and, obviously, a much larger percentage for those earning less.

A few important rules to know about catch-up contributions:

• You must be age 50 or older at the end of the calendar year to be eligible. But you don’t have to wait until your birthday to start contributing.
• The catch-up contribution must be made before the end of the plan year, which is typically based on the calendar year.
• For non-calendar plans, individuals can contribute before age 50, as long as they are turning 50 by the end of the year for which they are making the catch-up contribution.
• Employees between 60 and 63 can make an even larger catch-up contribution of up to $11,250.
• Starting in 2026, high earners (individuals earning more than $145,000 in wages subject to FICA taxes) will be required to make catch-up contributions in a Roth account (e.g., Roth 401(k)). If the plan does not offer a Roth option, you will not be able to make a catch-up contribution.

Fortunately, almost all employers offer catch-up provisions in their retirement plans, so most workers have the opportunity to make these contributions. 

However, Vanguard’s 2024 How America Saves report found that only 15 percent of all participants used this enhanced savings opportunity in 2023, a percentage that has remained relatively unchanged since 2016. Not surprisingly, this percentage was significantly higher for higher wage earners — 55 percent of participants with an income of more than $150,000 made catch-up contributions in 2023.

For workers who can take advantage of the catch-up provision based on their age and income, it may make sense to do so, even if it means revising family budgets, foregoing extra vacations or splurge purchases in exchange for the opportunity to enhance your future financial position.

Top reasons to take advantage of 401(k) catch-up contributions

1. They can be made pre-tax. Catch-up deductions can be made pre-tax, which has the effect of reducing taxable income, perhaps significantly, depending on your tax bracket. Plus, you’ll pay no taxes on the money as it grows in your retirement account. Taxes are due once you start withdrawing from your 401(k) in retirement — at which point you may be in a lower tax bracket.
2. Enhanced compounding. While an exact prediction of how much the extra contributions from age 50 to 65 could add to your retirement nest egg is not possible, especially during times of market volatility, the compounding effect on 15 years of catch-up contributions of more than $100,000 can help to close the gap between projected expenses and projected cash flow during a typical 20- to 25-year retirement.
3. Automatic contributions. Catch-up contributions are made automatically through elective salary deferrals, just like regular 401(k) deferrals.
4. Contributions to a Roth account. Catch-up contributions can also be made to Roth 401(k)s or split between traditional and Roth 401(k) accounts. While your tax break is not immediate with a Roth 401(k), you are eligible to make tax-free withdrawals in retirement.
5. Accelerated savings for late savers. Catch-up contributions are crucial if you are just starting to prepare for retirement in your fifties or if you need to rebuild your retirement savings for any reason.
6. Contributions all year long. You can begin your catch-up contributions in the calendar year you turn 50 — you do not have to wait until your birthday. So you’re able to spread out your contributions across the year.
7. Access to an employer match. Your catch-up contributions may be eligible for an employer match. Check with your human resources department for the specifics of your plan.
8. Increase in your available balance. Catch-up contributions are considered part of your available balance when requesting a loan or hardship withdrawal from your 401(k).
9. Breathing room for splurges. If you are on track with your retirement goals, taking advantage of the catch-up provision can help you exceed your goals, allowing you to comfortably take that extra vacation or splurge on a big purchase.

Impact of SECURE Act 2.0 on catch-up contributions

The passage of SECURE Act 2.0 at the end of 2022 made a few changes to catch-up contributions. Here are the key changes:

• Starting in 2026, if you make more than $145,000, catch-up contributions can only be made after taxes to a Roth account. This was initially set to begin in 2024, but the IRS announced a two-year transition period in 2023.
• Catch-up contribution limits for IRAs are now indexed for inflation, meaning the amount the IRS allows you to save in a tax-advantaged account could increase every year depending on cost of living increases.
• As of the beginning of 2025, there is a special catch-up contribution limit for employees aged 60-63. The limit is the greater of $11,250 or 150 percent of the regular catch-up limit in place for the taxable year.

Bottom line

Catch-up contributions can offer a great ability for older workers to add extra money to their retirement accounts, whether they’ve saved throughout their working life or really do need to catch up. With older Americans living longer than ever before, it’s valuable to ensure that you’ve built up all the wealth you need for potentially decades in retirement.

FAQs

• What is the 401(k) “super catch-up” for 2025?
  

  The SECURE Act 2.0 included provisions that increased the amount individuals could save in their 401(k) plans. The enhanced catch-up limits — or “super catch-ups” — allow employees ages 60 to 63 to defer an additional $11,250 for retirement. Once you turn 64, you’ll be subject to the standard (lower) catch-up contribution limits again.

  Note: Employers are not required to offer the standard or new super catch-up contribution provisions in 401(k) plans. Check with your plan administrator to see if it is available to you.

• Should I max out my 401(k) and catch up?
  

  Given the high contribution limits (tens of thousands of dollars per year), not everyone can afford to fully fund a 401(k), let alone max out catch-up contributions. But if you are behind on your retirement savings, it behooves you to try.

  Otherwise, a standard rule of thumb for retirement saving is to contribute at least enough to your 401(k) to earn any employer match. After that, direct funds into an IRA (to get access to a broader range of low-fee investments). Once the IRA is maxed out, turn back to the 401(k) to take advantage of the account’s tax-favored status.

• How many years can you do a 401(k) catch-up?
  

  Beginning in the year you turn 50, you can start making catch-up contributions and continue doing so for as long as you work at the company. Super catch-up contributions are only permitted for those aged 60 to 63, and only if your plan has this feature. When you turn 64, you’ll no longer be eligible to make enhanced catch-up contributions. However, you can still make standard catch-up contributions (up to an additional $7,500 in 2025).

— Bankrate’s Dayana Yochim contributed to an update of this article.