A Second Chance to Save: Making the Most of Catch-Up Contributions

By: Katelyn Levesque, Financial Planner

By: Rylee Fann, Financial Planning Intern

In life, finding ways to get ahead can be difficult. In personal finance, at times, it can feel almost impossible. But what if there was an opportunity for you to save beyond normal limits, putting more of your money to work for you?

In 1978, legislation was passed, and 401(k) plans started to become popular because they allowed tax benefits for both employees and employers. As time went on, there was a shift from defined benefit plans, like pensions, to defined contribution plans, like 401(k)s, forming the need for the employee to take saving for retirement into their own hands. Over time, deferral limits and options have changed significantly based on the different plan types.

Many people struggle to save more than a few percent of their income into their retirement funds in early employment years due to lack of disposable income. In our younger years, with many of us raising families, excess cash to save for retirement can be difficult to find. Deferral limits have increased over the years, but so have bills, groceries, and household costs in general. Most people, understandably so, put future needs on the back burner to take care of present needs. Once household expenses decrease, employees sometimes find themselves with extra disposable income, but not much saving time before retirement. This is a clear issue that led lawmakers to create the Catch-up Contribution.

The Economic Growth and Tax Relief Reconciliation Act of 2001 introduced the concept of “Catch-up” contributions. This allowed employees that were further into their career to use their newfound excess cashflow to save even more dollars into their employer-sponsored plans (or IRAs), in addition to the regular limits.

For 401(k) accounts and other employer sponsored plans in 2026, for employees age 50 and up, a catch-up of $8,000 is allowed, resulting in a maximum annual contribution of $32,500. Employees aged 60-63 are allowed an additional catch-up amount, being able to make a super catch-up contribution of an additional $3,250, resulting in a total contribution limit of $35,750. This super catch-up is for participating employer sponsored plans such as 401(k), Roth 401(k), 403(b), and 457(b) plans. If you are not sure if your plan qualifies, contact your plan sponsor or your employer’s HR Department.

The Catch-up and Super Catch-up options were set to leverage peak earning years. Individuals are often at their highest income toward the end of their careers, leading to the ability for greater contributions. Also, making additional tax deferred contributions can lessen the tax burden for taxpayers as well.