3 Ways Super Catch-Up Contributions Can Help You Boost Your 401(k) and Retire Sooner
Written by
Jake Safane
Edited by
Gary Dudak
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As you age, you have less time for your retirement investments to potentially grow, but you can also often contribute more to your retirement accounts. Normally, those who are 50 or over can contribute an extra $7,500 per year to their 401(k), above the regular limit of $23,500 for 2025.
However, thanks to the 2022 Secure 2.0 Act, those who are ages 60 to 63 qualify for an even higher catch-up contribution limit. The law allows for a so-called “super” catch-up contribution of $10,000 or up to 150% of the normal catch-up limit, whichever is greater.
“So 150% of $7,500 means individuals 60-63 can contribute $11,250 instead of $7,500 in addition to the standard 401(k) max of $23,500. This would bring their grand total employee deferral limit to $34,750 for the calendar year 2025,” explained Chris Kampitsis, CFP, financial advisor at Barnum Financial Group.
For those who qualify for this super catch-up contribution, it can help you boost your retirement savings and retire sooner in some key ways.
Directly Increase Your Retirement Balance
Being able to contribute $3,750 more than the normal catch-up contribution means you can directly add to your retirement balance. If you do that for ages 60-63, that’s an extra $15,000, without accounting for potential investment growth.
That extra amount could mean having over $100 extra per month in your retirement budget for over 12 years. Granted, taxes might reduce that, but investment gains might also increase it. Also, if the catch-up contribution limit increases in future years, you might be able to put away even more.
“The base catch-up changes periodically, but not annually. In 2015, the catch-up was $6,000. In 2020, it increased to $6,500. In 2023, it was raised once again to $7,500. As such, it is safe to assume that that limit will periodically rise, bringing the super catch-up along with it,” Kampitsis said.
Increase Tax Savings
Being able to save more in a 401(k) can provide substantial tax advantages. For those with traditional 401(k)s, the super-catch up limit “gives pre-retirees a tremendous opportunity to defer additional taxes that they may withdraw at a lower tax bracket later,” Kampitsis said.
If you have a Roth 401(k), you don’t get the upfront tax savings, but you can substantially increase your tax savings in retirement by being able to withdraw the money tax-free.
This higher limit can be particularly helpful for those nearing retirement to “really build up their Roth bucket, as many current retirees did not have too many years of their career with Roth 401(k) options being commonly available. Roth 401(k)s were launched to the public in 2006 as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001,” Kampitsis said.
If you have both options, consider what works best based on your budget.
“If cash flow is tight, doing more pre-tax catchup is recommended. If cash flow is strong, you might favor the Roth option — which will take those taxes out upfront and therefore take a bigger bite out of your net paycheck,” Kampitsis said.
Focus on Your Retirement Strategy
Lastly, super-catch contributions can be particularly helpful in terms of setting you up for retirement during what might be your last few years of working. By having the higher limit to aim for, you can really focus on what you want your retirement to look like.
“It is important that pre-retirees consider their final few years of employment as a dress rehearsal for retirement. Human nature tells us that spending won’t miraculously downshift just because we aren’t working — especially since we now have so much more time on our hands,” Kampitsis said.
So while it might be easier said than done to save more to hit the higher limit, if you think about it as a way to prepare to live on a lower income, that could be more attainable.
“Getting yourself to a reasonable, comfortable budget and saving the difference is critical in that pre-retirement red zone, and adding the super-catch up contributions to your cash flow mix might help in doing so. If you can’t save more prior to retirement, the odds of being able to spend less once retirement are slim,” Kampitsis explained.
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