Making Catch-Up Contributions for Retirement

I turn 50 in September. Can I start making catch-up contributions to my 401(k) and IRA now, or do I have to wait until after my birthday?

Retirement Account Contribution Limits for 2014

It doesn’t matter when your birthday is. You can make catch-up contributions anytime during the year that you turn 50. You can add an extra $1,000 to your IRA, for a total of $6,500 for the year, and an extra $5,500 to your 401(k), for a total of $23,000 for the year.

Many other employer-sponsored retirement plans allow catch-up contributions starting in the year you turn 50, including 457s, 403(b)s, if permitted by your plan, and the federal government’s Thrift Savings Plan. The extra contribution for those plans is also $5,500 for 2014.

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Some plans have rules that allow additional catch-up contributions. The 457 for public-sector employees has a pre-retirement catch-up option; you can double the maximum contribution (for a maximum of $35,000 in 2014) for up to three years before the normal retirement date specified in your plan’s documents (age 60 for many employees and even younger for some public-safety workers). Some workers use the extra catch-up option when they get a big payout from unused sick leave and vacation days right before retirement and want to invest it pretax in their retirement plan. You can’t use both the age-50 catch-up and the pre-retirement catch-up in the same year.

In some 403(b) plans, which are often offered to teachers and health care workers, if you have 15 years of service with a public school system, hospital, home health service agency, church or other eligible group, you may be able to make an extra catch-up contribution, depending on the size of your contributions in the past. For more information about the 403(b) catch-up rules, see the IRS’s 403(b) Contribution Limits.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.