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Catch-up contributions: Will they help older workers bridge the retirement gap?

Employees who start saving an additional $7,500 per year until age 67, while earning a modest 7% compounded annually, can add $250,000 to their retirement nest egg, says Ambassador Wealth Management’s Phill Battin.

By Lynn Cavanaugh | November 27, 2024 at 10:21 AM
Credit: Feodora/Adobe Stock

The average American begins saving for retirement at around the age of 28, though most would tell you they wish they had started sooner. The reason is fairly obvious: the earlier you begin your retirement journey, the better funded it will be by your investment earnings rather than your wages. While many 50- and 60-year-olds regret not contributing earlier in their lives, there are still ways for them to catch up.

How do catch-up contributions help workers 50 and older to exceed the annual limit they can put into their 401(k)? What are the current limits set by the IRS, and how instrumental are these additional payments in helping those reaching retirement age make up for lost time? While these changes provide relief for those who have not adequately prepared for retirement sooner, should even those who do have well-funded retirement plans make the most of these strategies, as well?

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