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Saving smartly for retirement could be the difference between having enough money to live the life you want and struggling to get by. For retirees, one tactic that can help give your savings a boost are catch-up contributions to retirement savings accounts.
Catch-up contributions allow savers who are age 50 or older to invest money in their retirement savings accounts beyond the typical IRS limit. But few eligible savers are taking advantage: Vanguard’s “How America Saves 2025” report found that only 16% of participants 50 or older made catch-up contributions in plans that offered them in 2024.
Knowing how much you can contribute to your portfolio the moment you turn 50 can help you build your nest egg faster. These laws are designed to help you save money in the future, allowing you to reduce your tax bill and grow your portfolio at the same time.
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The power of catch-up contributions
Catch-up contributions let savers age 50 or older boost their annual contribution limits for their 401(k) and individual retirement account (IRA) plans. Maxing out your regular contributions and the catch-up contributions acts as a sprint to the finish in your pre-retirement years. Catch-up contributions can also help lower your tax bill since contributions to 401(k)s and traditional IRAs are tax deductible.
The IRS determines how large catch-up contributions can be each year, as it does with regular contributions. Be sure to look up the rules and make sure you are eligible before contributing.
Due to recent legislation, high-income earners — those who make more than $150,000 in a year — are required to make their catch-up contributions as Roth contributions. Roth contributions are made with after-tax dollars, but you won’t have to pay taxes on qualified withdrawals of your earnings.
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Don’t forget about RMDs
Required minimum distributions (RMD) are mandatory withdrawals from tax-deferred retirement savings accounts, including 401(k)s and IRAs. Savers have to take RMDs at age 73, or 75 if they were born in 1960 or later.
It’s important to keep RMDs in mind when retirement planning and making contributions to your savings accounts. RMDs are taxable, so they’re critical to think about when tax planning for your retirement. While tax-deferred accounts come with RMDs, Roth accounts do not.
Check your employer’s plan to ensure you are capitalizing on contribution matches and catch-up contributions in a way that makes sense for your retirement and tax planning. Maxing your contributions can help you make more of your money work hard for you now so you can tap it for a comfortable retirement later.
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