Retirement Planning Common Questions

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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 2006 and 2007:

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

$15,000 regular annual contribution limit and $5,000 catch-up contribution limit for 2006
$15,500 regular annual contribution limit and $5,000 catch-up contribution limit for 2007

SIMPLE plans:

$10,000 regular annual contribution limit and $2,500 catch-up contribution limit for 2006
$10,500 regular annual contribution limit and $2,500 catch-up contribution limit for 2007

Traditional and Roth IRAs:

$4,000 regular annual contribution limit and $1,000 catch-up contribution limit for 2006
$4,000 regular annual contribution limit and $1,000 catch-up contribution limit for 2007

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GE 37979 (03/07)

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