More Opportunities to Save as You Approach Retirement

If you’re like many individuals, you may, over the years, have wished you could have put aside more for retirement. But with all your financial obligations, you may have found that to be challenging. Now, however, if you’re 50 years of age or older, there is a way you can easily help yourself save more for retirement—through the use of “catch-up contributions.”

What is a Catch-up Contribution?
The IRS regulates the maximum amount that individuals may contribute to their retirement plan(s) each year. But thanks to the Economic Growth and Tax Relief Reconciliation Act of 20011, those who are 50 or older may be eligible to increase their retirement savings amount each year beyond the IRS’s standard maximum for their plan(s). This increased amount is commonly referred to as a catch-up contribution.

For example in 2011, most participants in 401(k), 403(b) and 457 governmental plans are limited to contributing $16,500 in each of these years to their plan account. But for participants who are 50 and over, their total contribution limit is $22,000 in 2011—the standard limit of $16,500, plus the $5,500 catch-up limit2. Contribution limits for Individual Retirement Accounts (IRAs)—both Traditional and Roth—are different. See “Catch-up Contribution Amounts for 2011” below for details.

Catch-up Contribution Amounts for 2011
The chart below indicates the contribution limits that the IRS allows, by plan type, including catch-up contributions. These limits are for 2011.

Plan Type Standard Contribution Limit for Each Plan Type3 Catch-up Contribution Amount4 Total Contribution Limit for Retirement Savers 50 & Over
401(k) $16,500 $5,500 $22,000
457 governmental
Traditional IRA $5,000 $1,000 $6,000
Roth IRA


Is There a “Catch”?
When it comes to catch-up contributions, there are some important considerations to keep in mind:

  • Your retirement plan must allow catch-up contributions in order for you to be eligible. Refer to your plan rules and highlights to find out if your plan allows these contributions—and what the guidelines are concerning them.
  • To qualify, you must be 50 years of age or older by the December 31 of the year in which you are making your catch-up contributions.
  • If your employer-sponsored retirement plan restricts your annual contributions to an amount that’s less than the federal limit for participants in your type of plan, you should still be able to make a full catch-up contribution.2
  • Catch-up contributions are made to your plan account in the same way as your standard plan contributions. (Generally, you may not make a lump-sum catch-up contribution to your account.)

Special Considerations for 403(b) and 457 Plans

  • 403(b) programs may have an additional “catch-up” provision called the 15-year rule. This special provision allows participants to increase their annual contribution by $3,000 more than the current $16,500 limit. To qualify, workers must have completed at least 15 years of service with the same employer (years of service need not be consecutive), but cannot have contributed more than an average of $5,000 in previous years. 
  • 457 plans may have their own variations to the catch-up limits described here. Be sure to check your plan document for details.

Get the Facts on Catch-up Contributions
For help with determining how to best take advantage of this and other opportunities to supplement your retirement savings, contact your financial professional or a Certified* Prudential Retirement Counselor. Simply call 1-877-PRU-2100 toll free, Monday through Friday, from 8 a.m. to 6 p.m., ET. Prudential’s Retirement Counselors can also help you create a distribution strategy to turn the money you are saving into a steady stream of income in retirement. It’s never too early to start the conversation. 



*Many of Prudential Retirement’s Personal Retirement Services Retirement Counselors carry the distinct designation of Certified Retirement Consultants, an advanced certification available through the International Foundation for Retirement Education (InFRE). Certification includes mastery of retirement plan design, investment strategy, retirement income management, and retirement readiness and counseling.

1 In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001 which, among other things, encourages retirement savers to put aside more for the future—by allowing participants in qualified retirement plans who are 50 years of age or older to make “catch-up” contributions to their plan account.

2 Subject to plan provisions and certain other restrictions.

For participants through age 49.

For retirement savers who will be 50 or older by the December 31 of the year in which the catch-up contribution is being made.


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