What are catch-up contributions?

Answer:

If you are 50 or older, or you will reach age 50 by the end of the year, you may be able to make contributions to your IRA or employer-sponsored retirement plan above the normal contribution limit. Catch-up contributions are designed to help you make up any retirement savings shortfall by bumping up the amount you can save in the years leading up to retirement. Catch-up contributions can be made to traditional and Roth IRAs, as well as to 401(k) plans and certain other employer-sponsored retirement plans. But if you participate in an employer-sponsored retirement plan, check plan rules – not all plans allow catch-up contributions.

How much can you contribute as a catch-up contribution? It depends on the type of retirement plan you have and the tax year for which you are making the contribution.

Contribution for tax years 2007 and 2008:

401(k), 403(b), governmental 457(b) plans:*

$15,500 regular annual contribution limit and $5,000 catch-up contribution limit for 2007
$15,500 regular annual contribution limit and $5,000 catch-up contribution limit for 2008

SIMPLE plans:

$10,500 regular annual contribution limit and $2,500 catch-up contribution limit for 2007
$10,500 regular annual contribution limit and $2,500 catch-up contribution limit for 2008

Traditional and Roth IRAs:

$4,000 regular annual contribution limit and $1,000 catch-up contribution limit for 2007
$5,000 regular annual contribution limit and $1,000 catch-up contribution limit for 2008

*403(b) and 457(b) plans also have special catch-up rules that may apply.

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GE 50287 (12/09)

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