401k Catchup Contribution Amounts and Rules
Understand the strategic rules and recent regulatory changes that allow individuals over 50 to accelerate their 401k retirement savings.
A 401(k) plan is a retirement savings account offered by many employers. For older workers, the Internal Revenue Code allows for “catch-up contributions” as their income often peaks in their final working years. This mechanism permits them to contribute amounts to their 401(k) over and above the standard annual limits to bolster retirement funds.
Eligibility and Contribution Limits
To be eligible to make 401(k) catch-up contributions, an individual must be age 50 or older, or turn 50, by the last day of the calendar year.
For 2025, the standard employee contribution limit for a 401(k) is $23,500. The catch-up contribution limit for 2025 is an additional $7,500 for most eligible participants. This means an individual age 50 or over can contribute a total of $31,000 to their 401(k).
Beginning in 2025, a new provision from the SECURE 2.0 Act allows for an even higher catch-up limit for individuals aged 60, 61, 62, and 63. This special catch-up amount is the greater of $10,000 or 150% of the regular catch-up limit for the year. For 2025, this amounts to an $11,250 catch-up contribution, meaning an individual in this specific age bracket can contribute a total of $34,750. This higher limit is also indexed for inflation in future years.
An employer’s 401(k) plan must be designed to permit these contributions, but it is not a mandatory feature. The plan document, which governs the operation of the 401(k), will specify if catch-up contributions are allowed, so employees should confirm this provision with their plan administrator.
Making Catch-Up Contributions
The process for making catch-up contributions varies depending on the specific rules of the employer’s 401(k) plan, which generally use one of two methods.
Some plans require an employee to make a separate and distinct election for catch-up contributions. This is typically done through the company’s payroll or benefits system where the employee manages their regular 401(k) deferrals. In this scenario, the employee must specify the amount they wish to contribute as a catch-up contribution.
Other plans utilize an automated approach often called the “spillover” method. Under this system, an employee does not need to make a separate election. They simply set their total desired contribution rate, and once their contributions reach the regular annual limit, any subsequent contributions are automatically reclassified as catch-up contributions until that separate limit is met.
Employees can determine which method their plan uses by consulting their plan’s summary plan description or contacting their human resources department.
The High-Earner Roth Requirement
A change introduced by the SECURE 2.0 Act of 2022 affects high-income individuals making catch-up contributions. This provision, originally set to begin in 2024, mandates a specific tax treatment for these additional savings based on an employee’s prior-year wages. Due to administrative complexity, the IRS delayed the effective date, and the rule is now scheduled to take effect for taxable years beginning after December 31, 2025.
The rule applies to employees whose prior-year wages from the employer sponsoring the plan exceed a specific threshold. This threshold, based on Federal Insurance Contributions Act (FICA) wages, is set at $145,000 for 2025 wages (which determines Roth treatment for 2026 contributions) and will be indexed for inflation. If an employee’s wages surpass this amount, any catch-up contributions they make must be designated as Roth contributions.
A Roth contribution is made with after-tax dollars, meaning the employee pays income tax on the contributed amount in the current year. Unlike traditional pre-tax contributions that lower current taxable income, Roth contributions do not. The benefit is that qualified distributions of both the contributions and their earnings in retirement are completely tax-free. This new requirement does not affect the employee’s regular 401(k) contributions.
High-earning employees who wish to make catch-up contributions will lose the immediate tax deduction on that portion of their savings. Employers whose plans do not currently include a Roth contribution feature will need to amend their plans to add one if they want to continue offering catch-up contributions to their high-earning employees. If a plan does not have a Roth option, affected high-earners will be unable to make any catch-up contributions at all once the rule is effective.