How can we assist you? Book an appointment with us today!

Boost Your Retirement Nest Egg: Catch-Up Contributions for Those 50+

As retirement edges closer, many seasoned professionals start seeking avenues to amplify their retirement savings and ensure a financially secure future. An often-underutilized option is the "catch-up" contribution feature available in various retirement plans, which can play a pivotal role in increasing retirement funds. In this piece, we'll delve into the nuances of different retirement plans and their catch-up privileges, emphasizing the pivotal opportunities available to those approaching retirement age.

SEP IRAs: Maximizing High Contribution Limits

For self-employed individuals and small business owners, SEP IRAs offer a streamlined, tax-advantaged path to saving for retirement. Contributions to SEP IRAs are tax-deductible, with investment growth tax-deferred, making them a robust choice for efficient long-term savings growth.

Unlike 401(k)s or SIMPLE IRAs, SEP IRAs lack a specific catch-up contribution provision for older participants. However, their distinctive feature is the high contribution limit, allowing participants to save more aggressively. As of 2025, you can contribute the lesser of 25% of your compensation or a generous $70,000, enabling older Americans to substantially enhance their retirement accounts despite the absence of a formal catch-up provision.

Image 1

Exploring SIMPLE IRA and SIMPLE 401(k) Options

For 2025, the standard elective contribution cap for SIMPLE IRAs and SIMPLE 401(k) plans is established at $16,500. For participants aged 50 and over, a special catch-up contribution allows an additional $3,500, raising the total possible input to $19,000. This age-targeted benefit is vital for individuals hoping to escalate their savings during the final sprint to retirement.

Additionally, under the Secure 2.0 Act, contributors aged 60 to 63 can enjoy higher catch-up limits, up to $5,250 in 2025, indexed for inflation thereafter. Eligibility is determined by your age on December 31 of the contribution year.

Leveraging 401(k) Plans for Added Benefits

Popularly referred to under their IRS code section, 401(k) plans allow employees to defer a portion of their income into a retirement account, with the upper limit for 2025 set at $23,500. The catch-up provision permits an additional $7,500 for those 50 and older, increasing total contributions to $31,000 in 2025.

Through the Secure 2.0 Act, participants aged 60 to 63 benefit from enhanced catch-up provisions, boosting their potential contributions to $34,750 annually. This policy aims to assist older workers in accumulating more substantial funds as they transition towards retirement.

Image 2

Unveiling Opportunities in 403(b) Plans

403(b) plans, primarily available to public school employees and certain nonprofits, offer another excellent avenue for tax-deferred savings growth. For 2025, participants can contribute up to $23,500, with an additional $7,500 available through standard catch-up contributions to those 50 and older, further enhancing savings potential.

Eligible individuals can also take advantage of a "15-Year Rule," allowing for an extra $3,000 annually if they've completed 15 years of service with an eligible employer. This feature offers significant benefits for dedicated employees in educational or nonprofit roles.

Secure 2.0 Act enhancements for those aged 60 to 63 allow contributions up to $34,750 in 2025, further empowering late-career savers.

Explore Additional Retirement Strategies

  • Health Savings Accounts (HSAs): HSAs offer a triple tax benefit: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses remain untaxed. After reaching 65, withdrawals for non-medical expenses become penalty-free, similar to traditional IRAs.
  • Roth IRA Advantage: Roth IRAs provide flexibility by avoiding RMDs at any age, allowing funds to grow tax-free perpetually. Strategic Roth conversions can optimize tax positions and future withdrawals.
  • Contributions Beyond Age Barriers: With the SECURE Act, individuals over 70½ can contribute to IRAs as long as they have earned income, bolstering retirement savings further.

Strategically maximizing your retirement contributions requires astute planning and expert advice. Don't hesitate to reach out to Tangible Accounting, PLLC for personalized guidance on lucrative saving strategies and tailored advice.

Share this article...

Want tax & accounting tips and insights?

Sign up for our newsletter.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

Affiliations