Catch-Up Contributions

Business, Legal & Accounting Glossary

Definition: Catch-Up Contributions


Catch-Up Contributions

Quick Summary of Catch-Up Contributions


Additional tax-deferred funds that are set aside for retirement and are placed into retirement accounts such as a 401(k). Catch-up contributions are used by people who are over 50 years old and have less time to take advantage of compounding. Also, these may have a maximum contribution limit, which depends on the type of retirement account used by the contributor and the year the contribution is made.




Full Definition of Catch-Up Contributions


If you are 50 or older, you are eligible to make a catch-up payment to your employer-sponsored retirement savings plan and individual retirement account (IRA). The catch-up amounts, which are higher for employment plans than for IRAs, are adjusted periodically to keep pace with inflation. You are able to make catch-up contributions regardless of whether you previously donated the maximum amount allowed. Additionally, if you contribute to an employer plan and an IRA, you are eligible to use both catch-up methods. Earnings on catch-up contributions accrue tax-deferred, just like regular account earnings. Additionally, if your original contributions are tax-deductible, your catch-up payments are tax-deductible. Health savings accounts (HSAs), which you can open if you have a high-deductible health plan (HDHP), allow you to make catch-up payments if you are at least 55 years old. When you reach the age of 65, you are no longer eligible to contribute to an HSA.


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Definition Sources


Definitions for Catch-Up Contributions are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th April, 2022 | 0 Views.