I Need More Money for Retirement. Are There Ways to Catch Up?

Q. I know there are catch-up contributions for retirement plans. I’ve heard there’s also something called a “lifetime catch-up” contribution. How does that work?
— Saver

A. Catch-up contributions were added to the tax code by Congress in response to a fear that baby boomers were not saving enough for retirement.

They allow taxpayers turning 50 in a calendar year to make an additional contribution for that year — and subsequent years — to certain retirement plans, Cynthia Fusillo, a certified public accountant with Lassus Wherley in New Providence, New Jersey, said.

“The plans that potentially offer these catch-up contributions are 401K, 403B, 457 plans — all of which we will refer to as employer-sponsored plans — as well as IRAs,” Fusillo said. “Currently the catch-up amount is up to $6,000 annually for the employer-sponsored plans and up to $1,000 annually for IRAs.”

Fusillo said that employer plans are not required to permit catch-up contributions, although statistics show that over 90% of them do.

Check with your benefits department to see if your plan allows catch-ups or not.

Now, lifetime catch-up contributions are also called 15-year catch-up deferrals or the special 403B catch-up deferral.

These are available for some 403B plans, Fusillo said.

This contribution allow employees with 15 years or more of service, but who are not yet age 50, to contribute an additional amount annually.

“This will apply if the employee’s average, annual contribution was less than $5,000,” Fusillo said. “You can then contribute an additional $3,000 annually for a lifetime maximum of $15,000.”

Once you turn 50, the regular catch-up contribution rules apply, she said.

You can learn more about retirement plans from your benefits department, tax advisers and in IRS Publication 571.

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