A catch-up contribution refers to the extra amount that individuals aged 50 or older are allowed to contribute to their retirement savings accounts. It is a provision that allows these individuals to make additional contributions to certain tax-advantaged accounts beyond the standard annual limit.
The idea behind catch-up contributions is to help individuals who may be nearing retirement age and are behind in their savings to have a chance to ‘catch up’ and save more in a shorter timeframe. This provision is applicable to various types of retirement accounts, such as 401(k)s, 403(b)s, individual retirement accounts (IRAs), and certain other types of plans.
The catch-up contribution limit for 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan was $6,500. For IRAs, the catch-up contribution limit was $1,000. However, these limits can change over time due to inflation adjustments, so it’s always a good idea to verify the current limits from a reliable source.