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Retirement

IRA catch-up contributions: What you should know

Catch-up contributions are intended to help investors age 50 and older make up for missed investment opportunities. Learn how they work and key considerations.
6 minute read   •   January 17, 2025
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At a glance

  • Make up for lost time and maximize your savings with catch-up contributions. For 2024 and 2025, the IRA contribution limit for investors age 50 and older is $8,000.
  • Learn the reasons you should—or shouldn't—make catch-up contributions.

You've been saving for retirement and, and you feel confident about the progress you're making toward your goals. So when you're given the opportunity to make a catch-up contribution, should you do it? That depends on a variety of factors, including your finances, goals, and tax situation. Let's dive into the pros and cons of catch-up contributions to help you decide if they're right for you. 

What is a catch-up contribution?

Catchup contributions allow investors age 50 and older to contribute extra money to retirement accounts beyond the standard limits. IRAs, employer-sponsored plans, SIMPLE IRAs, SIMPLE 401(k) plans, and even health savings accounts (HSAs) offer catch-up contributions.1 If you have multiple accounts, you can make catch-up contributions to more than one of these plans.

Most investors can benefit from maximizing their savings during their working years, even as retirement approaches. For example, if your IRA earns a 6% average annual return, and you make an annual catch-up contribution of $1,000 starting in the year you turn 50, these catch-ups could generate more than $11,000 in investment earnings by the time you reach age 65. That would give you an extra $27,000 in retirement income.2

While this hypothetical example is compelling, real life isn't always that simple. A strategy that makes sense for another investor might not work for you. It's important to weigh all the factors in your unique situation before committing additional cash to a tax-advantaged account.

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Catch-up contribution amounts and limits

Each type of retirement account has different catch-up limits, provisions, and rules.

IRAs—Traditional and Roth

For tax years 2024 and 2025, you can make a $1,000 catch-up contribution—in addition to the $7,000 annual contribution limit—if you're age 50 or older, for a maximum of $8,000. Note that you can't contribute more than you earn in any given year. If you're married and have no income, you may be able to open a spousal IRA to save for retirement.

You can make an IRA contribution for a given tax year anytime between January 1 of that year and the tax-filing deadline in the following year (usually April 15).

The IRA contribution limit dictates the total amount an investor can save for retirement each year. You can divide your contribution among 2 or more IRAs—Roth, traditional, or a combination, but your total contribution across your retirement accounts can't exceed the limit.

Bear in mind that your eligibility to contribute to a Roth IRA depends on your income. 

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401(k), 403(b), and 457 plans and the federal Thrift Savings Plan

For tax year 2024, the maximum contribution limit for these retirement plans is $23,000, with a $7,500 catch-up contribution allowed for those who are 50 and over. For tax year 2025, the contribution limit rises to $23,500, while the catch-up provision remains the same.4 In other words, you could potentially contribute up to $31,000 per year in these employer-based plans.

The SECURE Act of 2022 (SECURE 2.0) allows those who are ages 60–63 to make an even higher catch-up contribution for 2025—$11,250 instead of $7,500. These plan participants could potentially contribute $34,750 per year.
 

Health savings accounts

In addition to traditional retirement savings, health savings accounts (HSAs) also have catch-up provisions.

An HSA allows participants in high-deductible health insurance plans to save money for medical expenses while offering unique retirement savings benefits. Unlike flexible spending accounts, HSAs provide tax-advantaged investment opportunities that can be an additional retirement savings vehicle. If you can pay for health care expenses out of pocket rather than through your HSA savings, you can invest your HSA savings in a brokerage account, potentially growing your retirement nest egg.

The IRS sets annual contribution limits for HSAs: $4,150 for individual plans and $8,300 for family plans for 2024. They'll increase to $4,300 and $8,550, respectively, for 2025. HSAs offer catch-up contributions for individuals 55 and older, allowing them to save an additional $1,000 each tax year for future health care and retirement expenses.

Catch-up contribution considerations

While catch-up contributions can be a powerful way to boost your retirement savings, they aren't a one-size-fits-all solution. The following considerations can help you evaluate whether making these additional contributions aligns with your unique financial situation, retirement goals, and overall financial health.
 

When to consider making a catch-up contribution

You might want to prioritize a catch-up contribution if one or more of these situations apply to you:

  • Missed investment opportunities: If you've had gaps in your ability to add to your retirement savings during your working years, catch-up contributions are an excellent way to compensate for lost time and potential investment growth.
  • Tax planning strategies: If you have a high income and want to reduce your current tax liability, traditional IRA catch-up contributions may give you a valuable tax deduction.
  • Future tax optimization: If you expect your current income to be higher in the near future, a Roth IRA catch-up contribution can provide tax-exempt income during retirement, when your tax rate might be higher.
  • Budget and retirement goals: If it fits within your budget, a catch-up contribution can be an attractive option that can help you reach or exceed your retirement savings target.

An additional change under SECURE 2.0 will affect higher-income earners starting with tax year 2026. If you earn more than $145,000, any catch-up contributions you make in an employer-sponsored retirement plan will need to be made with after-tax dollars and go into a Roth account. In other words, you won't get a tax deduction for your catch-up contribution.3
 

When to consider holding off

Making a catch-up contribution may not be necessary or in your best interest if one or more of these describe your current situation:

  • You're currently taking withdrawals from a retirement account (or you're ready to start).
  • You anticipate needing the catch-up contribution to cover other expenses in the next year, including saving in an emergency fund.
  • You have other savings goals, such as saving for a loved one's education, taking a vacation, or buying a home, and you want to focus on saving for those plans.
  • You've consistently saved for retirement, and you feel confident in your ability to reach (or exceed) your retirement savings goal.

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It's not all or nothing

Making (or skipping) a catch-up contribution in any given year won't make or break your retirement dream. Catch-ups are simply an opportunity to save more as retirement approaches, if it fits into your budget and supports your goals.

If you're on the fence about what to do, consider making a partial catch-up contribution, or make a catch-up contribution in just your IRA (but no other retirement accounts).

You can also partner with a financial advisor who can give you a recommendation about catch-up contributions as part of your complete retirement plan. 

Learn which type of advice is best for you.

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1HSA catch-up contributions can be made starting at age 55.

2This hypothetical example doesn't represent the return on any particular investment and the rate isn't guaranteed. The final account balance doesn't reflect any taxes or penalties that may be due upon distribution.

3IRS Notice 2023-62, Guidance on Section 603 of the SECURE 2.0 Act with Respect to Catch-Up Contributions (PDF). IRS, August 25, 2023.
 

All investing is subject to risk, including the possible loss of the money you invest.

When taking withdrawals from an IRA or employer plan account before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

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