Catch-up contributions are contributions made beyond the annual limits to certain retirement accounts. These catch-up contributions should help taxpayers who did not save enough in the past to meet the differences by catching up with higher contributions. There are certain benefits to taking advantage of the catch-up retirement plan in 2019 after changes put into place by the Tax Cuts and Job Act (TCJA). Contact our experienced financial planners if you would like more information about setting aside more savings this year.
What are the Perks of Catch-Up Contributions?
The main benefit of the catch-up contribution is that you can add significant amounts to your retirement funds to make up for not contributing enough in the past. These contributions are typically pretax, so this means they can reduce your taxable income for the year. The reductions may be a perk in 2018 if you had itemized deductions that may be reduced this year by the TCJA.
Catch-Up Contributions for IRA Accounts
Keep in mind that the catch-up contributions are also available for IRAs, but the deadline for 2018 is later. There are a few things that can affect your eligibility, including your income, if your spouse is part of an employer-sponsored retirement plan, or if you are behind on contributions to begin with. We can help you clear up exactly the best way to go when it comes to making your retirement the best that it can be.
Who is Eligible to Add to Their Retirement through Catch-Contributions?
To be eligible to make a "catch-up" contribution, you must be 50 years or older on December 31, 2018, still working, and already contributing to your 401(k) plan or Savings Incentive Match Plan for Employees up to the annual limit. The limits are as follows:
- If you have reached the $18,500 max limit for your contributions, you can add an extra $6,000.
- If your employer’s contributions under SIMPLE are $12,500, you can add $3,000 in most cases.
To discuss your options for adding to your retirement funds, contact us at firstname.lastname@example.org or 952.893.9320. We can help you learn ways to boost your retirement funds, no matter what stage of the journey you are at.
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File Download: The Benefits of the Catch-Up Retirement Plan after TCJA