Catch-Up Contribution
A type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k)s and/or individual retirement accounts. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) created this provision so that older individuals would be able to set aside enough savings for retirement. Investopedia Says:
Originally, the ability to make catch-up contributions under EGTRRA was set to end at around 2011. However, the Pension Protection Act of 2006 made catch-up contributions and other pension-related provisions permanent.
Although using catch-up contributions is a great way for many people to expand their retirement savings, a report from the Vanguard Center for Retirement Research entitled "Catch-Up Contributions in 2004: Plan Sponsor and Participant Adoption" (2004) found that only 13% of eligible candidates use catch-up contributions to expand their savings. Related Terms:
401(k) Plan
Economic Growth And Tax Relief Reconciliation Act of 2001 - EGTRRA
Heroes Earned Retirement Opportunities Act - HERO
Individual Retirement Account - IRA
Roth 401(k)
Roth IRA
Thrift Savings Plan - TSP
Traditional IRA |