The years between turning 50 and retirement can be some of the very best. Hopefully you’ve earned enough to start living comfortably, you’re accomplished in your job and life, and you know which risks are worth taking. Consider these examples: A man named Jack Cover revolutionized law enforcement practices at age 50 when he invented the Taser. Julia Child didn’t begin her iconic cooking show until she was 51. And Ray Croc launched the global franchise McDonalds at 52.
Even the federal government knows that this period of life is special. According to the IRS, 50 is the magical age when you get to contribute thousands of dollars more to your retirement account each year, commonly called “catch up contributions.”
Under current regulations, individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions. Annual catch-up contributions up to $6,500 in 2020 ($6,000 in 2015 - 2019) may be permitted by these plans: 401(k) (other than a SIMPLE 401(k)), 403(b), SARSEP, governmental 457(b). Elective deferrals are not treated as catch-up contributions until they exceed the limit of $19,500 in 2020 ($19,000 in 2019) or the ADP test limit of section 401(k)(3) or the plan limit (if any).
Be sure to visit the IRS website for the most current limits.
This special perk is a real gift to investors looking to boost their savings, and even if your birthday doesn’t come until the very end of the year you can still take advantage. It’s a fast, simple way to ease into those golden retirement years with extra resources, and it takes nothing but knowledge and discipline. If you want to build making catch up contributions into your retirement planning, let’s connect.
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