For those in their 50′s and are still actively employed or working as entrepreneurs, they can still make 401K catch up contributions on top of the existing limit for a specific year. Currently, the maximum 401K limit is set at $17,000 for an employee and $50,000 for entrepreneurs or self-employed individuals. An additional catch up contribution of $5,500 make up the total contribution of the senior contributors for a specific year – $22,500 and $55,000 respectively. For those who are working for smaller companies, simple 401K plans are usually offered to employees and the catch up contribution for 50-year old seniors must not exceed $2,500.
Do take note that employers are not required by law to deduct the 401K catch up contributions of their employees. You may talk to your 401K administrator regarding your situation and see if you can find alternative options to benefit from your 401K catch up contributions.
One of the benefits that 50-year old contributor may get from their 401K catch up contributions is the yearly increase in their retirement savings. And since it is normal to see 50-something employees still working and contributing to their 401K every year, retiring would be a lot comfortable for them and their families.
[adsense-post-left]The 401K catch up contributions are truly beneficial to contributors who are 50 and above. So if you have not been serious about your 401K in the past years, you can take advantage of this provision in order to save enough for your retirement.
Although not every 401K plan holder is investing in stocks, bonds and other markets, the addition of 401K catch up contributions can make a significant change in an individual’s future savings. If you wish to invest in the aforementioned markets while making catch up contributions, it is best to consult a financial adviser. And make sure to also check up on the latest updates from the IRS website.