For those readers age 50 and over, you have a great savings tool available to you — the catch-up contribution provision for supplemental retirement savings plans. Simply stated, the catch-up provision allows individuals age 50 and above (or turning age 50 in the calendar year) to contribute, or deposit, more savings annually into their IRA, 401(k), 403(b), SARSEP, governmental 457(b), SIMPLE IRA, or SIMPLE 401(k) plan.
The additional catch-up amount will depend upon the type of plan to which you contribute. The IRS states, “401(k) (non-SIMPLE 401(k)), 403(b), SARSEP and governmental 457(b) plans may permit catch-up contributions up to $5,500 in 2009. A SIMPLE IRA plan and a SIMPLE 401(k) plan may permit catch-up contributions up to $2,500 in 2009.” These amounts remain the same for 2010, as well. Roth and traditional IRAs offer an additional $1,000 in catch-up contributions in both 2009 and 2010.
Created originally as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) the catch-up provision was slated to end around 2011. However, the Pension Protection Act of 2006 extended the life of the catch-up contribution offering Americans closer to retirement age the chance to save more for their future.
If you qualify for the provision, talk with your investment advisor to find out more about how to best take advantage of any available catch-ups, and if doing so is right for your personal retirement planning needs.
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