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Ask Alight: What is a 401(k) catch-up contribution?

Written by Rob Austin, FSA, Vice President Head of Research Wealth Solutions & Strategy

Ask Alight: What is a 401(k) catch-up contribution?

Are you nearing retirement age, but concerned you may not have a big enough nest egg to last throughout your golden years? 401(k) catch-up contributions may be just the ticket to ensuring retirement success.

When it comes to saving for retirement, defined contribution (DC) plans are far and away the most popular savings vehicle offered by employers – and with good reason. DC plans allow employees to invest in the capital markets, where they grow until retirement. As people approach retirement, however, they may start to worry whether they have saved enough to cover living and health expenses for the remainder of their lives. That’s where 401(k) catch-up contributions come into play.

Who is eligible for 401(k) catch-up contributions?1

Anyone can start making catch-up contributions at the beginning of the year in which they turn 50, provided their 401(k) plan allows for them. Fortunately, nearly all 401(k) plans at large employers offer this option, according to our research. 

What is the 2023 catch-up limit?

Each year, the IRS sets a maximum amount that can be contributed to a 401(k) plan. For 2023, it’s $22,500.2 However, people who are catch-up eligible can contribute an additional $7,500 to the plan, bringing their total to $30,000.

Why should I take advantage of catch-up contributions?

Catch-up contributions provide many of the same advantages as saving to a 401(k) plan in the first place. If they are made on a pre-tax basis, your tax bill may be reduced this year. And contributing more to your 401(k) will likely give you a bigger nest egg in retirement. In fact, if you start saving an additional $7,500 every year at age 50, you’ll have contributed well over $100,000 by the time you turn 65. The balance could be higher or lower, depending on how you invest your money and market performance.

Aside from growing your retirement nest egg, making catch-up contributions can also help you learn to live off a lower income. When retirement comes around, you’ll be accustomed to spending less, which will help stretch your retirement savings further.

However, catch-up contributions are not for everyone. Saving for retirement is important, but so is having enough money to pay for the life you live today. You should not be making extreme sacrifices to set aside extra funds for your golden years. If you’re over age 50, hitting the 401(k) contribution limit and comfortably covering your current expenses, then you may want to consider making catch-up contributions.


1There are separate rules for so-called three-year catch-ups to 457 plans. Because those plans are not as common as 401(k) plans, we don’t talk about them here.

2This applies to traditional (pre-tax) contributions and Roth contributions. After-tax contributions may have higher amounts.

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