Retirement Planning After 50: Catch-Up Contributions to Lower Taxes and Grow Wealth
Are you age 50 or older? If so, you’re eligible to boost your retirement savings with additional “catch-up” contributions to your retirement accounts. These extra contributions can significantly impact your long-term wealth—and they’re often more valuable than you might realize.
IRA Contribution Limits for 2025
For 2025, eligible individuals can contribute up to $7,000 (or 100% of earned income, whichever is less) to a traditional or Roth IRA. If you’re 50 or older by December 31, 2025, you can make an additional $1,000 catch-up contribution, for a total of $8,000. Contributions for 2025 can be made until April 15, 2026.
Traditional IRA: Catch-up contributions may be tax-deductible, reducing your current tax bill. However, deductions may be limited if you (or your spouse) are covered by a workplace retirement plan and your income is above IRS thresholds.
Roth IRA: Contributions are made with after-tax dollars, so they don’t reduce your taxable income—but qualified withdrawals after age 59½ are federal tax-free. Note: income limits apply.
High earners who are ineligible for Roth IRAs can still make nondeductible contributions to a traditional IRA, allowing tax-deferred growth.
Employer-Sponsored Plans: 401(k), 403(b), and 457
In 2025, the standard contribution limit for these plans is $23,500. If you’re 50 or older, you can contribute an additional $7,500, bringing the total to $31,000—provided your plan allows catch-up contributions.
Contributions reduce your taxable wages, creating an immediate tax benefit.
You can use the tax savings to offset the cost of contributing more—or invest the savings separately to grow your retirement assets even further.
Talk to your HR department to find out how to set up or increase your catch-up contributions.
How Catch-Up Contributions Can Grow Over Time
These extra contributions add up—especially when compounded over several years. Here are three scenarios to show how powerful they can be:
Example 1: IRA Catch-Up Only
If you contribute an extra $1,000 each year from age 50 to 65 (15 years):
4% annual return: $22,000
8% annual return: $30,000
Example 2: Employer Plan Catch-Up Only
If you contribute an extra $7,500 each year from age 50 to 65:
4% annual return: $164,000
8% annual return: $227,000
Example 3: IRA + Employer Plan Catch-Ups
If you contribute both $1,000 to your IRA and $7,500 to your employer plan annually from age 50 to 65:
4% annual return: $186,000
8% annual return: $258,000
Small Contributions, Big Impact
Catch-up contributions are a simple, powerful tool to increase your retirement savings—especially if you’re getting a late start or want to strengthen your financial future. If your spouse qualifies too, the potential benefits can double.
Need help deciding how catch-up contributions fit into your retirement and tax strategy? Contact us for personalized guidance.