What You Should Know About Making 403(b) Catch-Up Contributions

Question: How do catch-up contributions work for 403(b)s? I understand there are two kinds of catch-ups, not just one for people who are 50 and older, as with 401(k)s.

AYou’re correct—there are two kinds of catch-up contributions for 403(b)s, the tax-deferred retirement savings plans available to teachers and employees of nonprofit organizations.

One type of catch-up contribution is the same as that of 401(k)s: If you’re 50 or older anytime during the year, you can contribute an extra $6,000 to your 403(b), bringing your total contributions to $24,000 in 2017.

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Some 403(b) plans also offer another kind of catch-up contribution, called the “15-year rule.” If you’ve been working for your current employer for 15 years or more and your average annual contribution was less than $5,000 per year, then you can contribute up to $3,000 extra per year, with a $15,000 lifetime maximum. You don’t need to be 50 years old to qualify for this type of catch-up contribution, but if you are 50 or older, you can make both types of catch-up contributions in the same year.

However, many plans choose not to offer the 15-year-rule option for administrative reasons, says Dan Otter, a teacher who operates the 403(b) and 457 education and advocacy website 403bwise. “Normally, the employment length is easy to verify, but the cumulative contributions can be more difficult to keep track of,” he says. Ask your employer whether your plan offers both types of catch-up contributions and, if so, how much you can contribute.

For more information about the rules for 403(b)s, see 403bwise.com. Also see Retirement Plans for Workers Who Don’t Have a 401(k).

Got a question? Ask Kim at askkim@kiplinger.com.