I started to say Fun, Foxy and Fifty but that sounds like a saying on cocktail napkin. If you are fifty and fun, foxy or fabulous then this article is for you.
Feeling like you need to make up for lost time… that is in regard to your retirement savings? You are not alone. Many people are concerned they have not saved enough. If you are over fifty you may be eligible to take advantage of “catch-up” contributions on your retirement savings. “Catch-up” contributions enable savers age 50 and over to increase contributions at a time when retirement is drawing closer and closer.
Age-50 catch-up contributions are possible in 401k, 403(b) and 457 plans, and IRAs, but the rules differ among plans. An employer is not required to provide for catch-up contributions in any of its plans but most do. If your plan allows catch-up contributions, it must allow all eligible participants to make the same election with respect to catch-up contributions. This is a special provision enacted out of concern for baby boomers that haven’t saved enough for retirement.
It may be difficult to budget for the entire additional contribution, but even a small increase in your contribution can make a difference in your available savings at retirement. A little increase now can add up to a lot over time when you consider the added benefits of tax deferral and compounding.
Check with your employer and see if you are eligible for ‘catch-up” contributions in your company retirement plan and don’t forget your individual retirement accounts. Catch-up contributions are allowed in both a traditional IRA as well as a Roth IRA.
There may still be time to take advantage of this additional savings for 2012.
If you participate in a traditional or safe harbor 401(k) plan and you are age 50 or older:
The elective deferral limit increases by $5,500 for 2012 and 2013.
The limit is subject to cost-of-living increases after 2013.
If you participate in a SIMPLE 401(k) plan and you are age 50 or older:
- The elective deferral limit increases by $2,500 for 2012 and 2013.
- The limit is subject to cost-of-living increases after 2013.
The catch-up contribution you can make for a year cannot exceed the lesser of the following amounts:
- The catch-up contribution limit, above, or
- The excess of your compensation over the elective deferrals that are not catch-up contributions.