Advertisement
retirement

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

Workers 50 and older aren't the only ones who can make bonus 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.

Advertisement - Article continues below

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.

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.

Advertisement
Advertisement

Most Popular

Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
September 16, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
September 18, 2020
5 Unfortunate Estate Planning Myths You Probably Believe
estate planning

5 Unfortunate Estate Planning Myths You Probably Believe

These all-too-common misconceptions can steer your estate plans in the wrong direction right from the start. Here’s how to overcome them and tips to b…
September 17, 2020

Recommended

Insurance for Long-Term Care at Home
retirement

Insurance for Long-Term Care at Home

In the wake of COVID-wracked nursing homes, increasingly more people are looking at options to age in place with long-term care insurance.
September 17, 2020
Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
September 16, 2020
10 Things You'll Spend More on in Retirement
retirement

10 Things You'll Spend More on in Retirement

From reading materials to debt, the demands on your savings during your golden years might surprise you.
September 16, 2020
Retirees, Create An Emergency Fund for Rental Property
Business Costs & Regulation

Retirees, Create An Emergency Fund for Rental Property

Build a cushion to protect your income from an unforeseen crisis.
September 15, 2020