As we make a fresh start this new year, it’s a great time to review your retirement plan contributions. It goes without saying that the more you can contribute to your retirement accounts, the better. Many people’s retiring savings are less than where they want them to be. There are limits to the dollar amounts you can contribute, but if you are 50 or older and have earned income, you can take advantage of a “catch-up” contribution. That catch-up contribution extends to anyone who turns 50 in 2021. Here is the breakdown of those catch-up amounts:
- Traditional or Roth IRA. The 2021 contribution limit is $6,000. If you will be 50 or older on or before December 31, 2021, you can contribute an additional $1,000, for a total of $7,000 in contributions.
- 401(k) Plans. The 2021 contribution limit $19,500. For those 50 or older in 2021, the catch-up contribution is $6,500, for a total contribution limit of $26,000.
- Simple IRAs. The 2021 contribution limit is $13,500. If you will be 50 or older in 2021, the additional catch-up is $3,000. Thus, the total contributions for 2021 can be $16,500.
While most people don’t enjoy getting older, there are a few perks that come with age, and these catch-up contributions are one of them. Take advantage of these benefits and increase your annual contributions to put yourself on the path to a better retirement.