Three Reasons to Skip the 401(k) Super Catch-Up

The 401(k) super catch-up provision is the government's way of helping those on the cusp of retirement sock away more funds in their 401(k) plans. It's hardly a secret that many Americans are woefully underprepared for retirement. The median retirement savings account balance among 55- to 64-year-olds was just $185,000 as of 2022, the last year the Federal Reserve collected this data. And while that number has likely been bolstered by recent stock market gains, it’s still alarmingly low given that people in this age group are near retirement.

A separate survey by AARP found that as of 2024, 20% of Americans aged 50 and over had no retirement savings at all. And as of last year, 79% of Americans agreed that the nation faces a retirement crisis, according to the National Institute on Retirement Security.

It's for this reason that catch-up contributions can be a lifeline for older workers who are behind on building savings. Both employer-sponsored 401(k)s and IRAs allow for them. But whereas the IRA catch-up for workers 50 and over is only $1,000, bringing the total allowable contribution in 2025 to $8,000, older 401(k) savers get more leeway.

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What is the 401(k) super catch-up?

This year, workers 50 and older get a $7,500 catch-up in their 401(k)s, bringing their contribution limit to $31,000. But there's a new provision for workers between ages 60 and 63.

It's been dubbed the super catch-up, and it allows workers in this age range to contribute an extra $11,250 to their 401(k)s this year instead of $7,500. That brings their total allowable contribution to $34,750.

Of course, it's worth noting that employers aren't required to offer a super catch-up. But there's a good chance many workplace plans will adopt this feature because there's little reason not to.

That said, while the 401(k) super catch-up might benefit some workers, it's not necessarily optimal for everyone. And for some near-retirees, a super catch-up could be a less-than-optimal choice.

While 401(k) super catch-ups are a good idea in theory, their design has flaws.

Here are three reasons to pause before you use a super catch-up.

1. Super catch-ups are not super-sized

Faron Daugs, Wealth Advisor, Founder, and CEO at Harrison Wallace Financial Group, says that the new 401(k) super catch-up offers limited value — namely, because if you can afford the super catch-up, you probably don’t need it.

Contributing $34,750 to a 401(k) in a single year requires a pretty substantial income. People who earn enough to be able to do that probably aren’t behind on retirement savings, explains Daugs, and are therefore likely to get limited benefits other than perhaps shielding a few extra thousand dollars from taxes.

"My clients are not necessarily super excited about it," he says. “If the dollar amount was really significant, then this could really be more of a strategy we might implement for those late savers. But being around $4,000, it's not going to be earth-shattering.” (The standard 401(k) catch-up is $7,500, about $4,000 less than the super catch-up limit of $11,250.)

Daugs also pointed out that beginning in 2026, savers whose wages are above $145,000 will be limited to making catch-up 401(k) contributions to a Roth account, thereby losing the immediate tax break. However, that change will likely impact most people who can afford the super catch-up.

Rather than put extra money toward a 401(k) super-catch-up, Daugs suggests that near-retirees consider other options, whether it’s a CD ladder or even a high-yield savings account. It’s generally advisable for near-retirees to have at least one to two years’ worth of expenses in cash in case of a market crash or downturn.

There’s also nothing wrong with investing that money, Daugs says. However, given the limited investment options some 401(k)s have, it could pay to look elsewhere.

2. The super catch-up time frame is super short

Chad Willardson, Founder at Pacific Capital, concurs with Daugs in that a 401(k) super catch-up probably isn’t going to make a significant dent in your retirement income planning if you’ve been a consistent saver throughout your career.

"If the super catch-up said you can start at 55 and put away an extra $25,000 a year, that's significant,” says Willardson. “But this is a very short window, sometimes right before someone's retiring, and there's not a significant amount of time for that money to compound.”

Willardson suggests that older workers interested in a 401(k) super catch-up consider when they’ll need to sell the investments and use the money.

"If someone is retiring at 65, then I'm not sure if it's a significant difference whether you invest in a CD, a tax-free bond or a super catch-up provision,” Willardson explains. “But if you're working longer, maybe there's some added benefit.”

3. Your 401(k) may not offer super growth

Another issue is that many 401(k) savers often invest in target-date funds, which are designed to adjust their risk profiles as retirement draws near. Target-date funds are a popular default option for 401(k)s. But this strategy makes the super catch-up even less appealing since these funds will typically generate conservative returns for workers who are old enough to take advantage of the super catch-up.

"If you're not actively investing for growth inside of your retirement plan and you have already dialed back the risk profile of your retirement plan, then those are going to be tempered returns,” says Willardson. “And it's not a significant difference to put money into that account other than the short-term tax savings."

But super catch ups may still be worth it

Though 401(k) super catch-ups may not be helpful to some savers, Rick Craft, AIF, CLU, ChFC, CEO of Wealth Advisory Group, doesn’t see a problem with 401(k) super catch-ups. In fact, he’s a fan.

"I think Americans are poor savers to begin with,” he says. “And any provision that makes it attractive for them to save has no downside."

That said, Craft does find it strange that this provision only applies to a narrow group of people. And he also thinks it’s a shame that lawmakers didn’t give savers the benefit of more time.

“If they gave [the super catch-up] to 51- to 54-year-olds, they'd put an extra decade of compound returns on their side,” he explains.

Craft also acknowledges that the super catch-up may not be widely adopted among savers who are eligible to use it. “There's a small percentage of people who even max out at the regular contribution limits," he says.

However, Craft insists that the super catch-up has some value. "It gives people a checkpoint to say, ‘What do I need?’ And if it gets anybody to reflect on where they stand on their financial journey, then it's a positive."

Read More

• Want to Retire With $100K a Year? Here's How Much to Save
• 401(k) Super Catch-Ups: Are They Right for You?
• The Average 401(k) Balance by Age
• You Can Be a 401(k) Millionaire: Here's How