401(k) Catch-Up Contribution FAQs: Your Top Questions Answered (2025 Rules)

As retirement gets closer, many individuals start to wonder how they can supercharge their savings and make up for lost time. For those age 50 and older, catch-up contributions offer a powerful opportunity to contribute more to retirement accounts beyond the standard annual limits. Below, I’ve addressed some of the most common questions I get from clients about catch-up contributions, especially with the updated 2025 rules in play.

Can I make catch-up contributions if I’m working part-time in retirement?

Yes, as long as you have earned income from a job, and you have met the plan’s eligibility requirements. So, even if you’ve scaled back your hours or semi-retired, you may still be eligible to make additional contributions.

For example, if you're age 65 and working part-time and eligible for your company’s 401(k) plan, you can contribute up to $23,500, plus an extra $7,500 in catch-up contributions for a total of $31,000 in 2025, assuming you have at least $31,000 in W2 compensation. 

If you have less than $31,000 in W2 comp, you will be capped by the lesser of the annual contribution limit or 100% of your W2 compensation.

Are Roth catch-up contributions allowed?

Yes. If your employer plan offers a Roth option, you can choose to make your catch-up contributions as Roth dollars. This means you contribute after-tax money now and take qualified distributions tax-free in retirement.

This option is popular for individuals who are in the same tax bracket now as they plan to be in retirement. The Roth source also avoids required minimum distributions (RMDs) starting at age 73 or 75.

How do catch-up contributions impact required minimum distributions (RMDs)?

Catch-up contributions themselves don’t change the timing or calculation of RMDs. However, where you put the catch-up dollars can affect your future RMDs. If you contribute catch-up dollars to a Roth 401(k) and then roll over the balance to a Roth IRA prior to the RMD start age, RMDs are not required.  

Adding more to the pre-tax employee deferral source within the plan may increase your future RMD requirement since pre-tax retirement accounts are subject to the annual RMD requirement once you reach age 73 (for those born 1951–1959) or 75 (for those born 1960 or later).

Should I prioritize catch-up contributions or pay down my mortgage?

This depends on your interest rate, your retirement timeline, tax bracket, and your overall financial goals. Generally, if your mortgage interest rate is below 4% and you’re behind on retirement savings, catch-up contributions may be a better use of your idle cash, especially if your investments are growing tax-deferred (pre-tax) or tax-free (roth).

However, if you’re already on track for retirement and the psychological benefit of being debt-free is important to you, putting extra cash toward your mortgage can make sense. It’s all about balancing the right financial decision with your personal preferences.

What happens if I forget to update my payroll deferrals after turning 50?

Unfortunately, you won’t automatically get the benefit since your employer’s payroll system won’t adjust your contributions just because you had a birthday. You need to take action and manually increase your deferrals to take advantage of the higher limits.

For example, if you turn 50 this year and forget to bump your 401(k) deferrals, you may miss out on contributing an additional $7,500. Worse yet, once the calendar year closes, you can't go back and make up for it.

Are there additional tax benefits associated with making catch-up contributions?

It’s common that the years leading up to retirement are often the highest income years for an individual.  The additional pre-tax contributions associated with the catch-up contribution allow employees to take more of their income off the table during the peak income years and shift it into the retirement years, when ideally they are in a lower tax bracket.

What is the new age 60 – 63 catch-up contribution?

Starting in 2025, there is a new enhanced catch-up contribution available to employees covered by 401(k) and 403(b) plans who are aged 60 to 63.  Instead of being limited to just the regular $7,500 catch-up contribution, in 2025, employees age 60 – 63 will be allowed to make a catch-up contribution equal to $11,250. 

What is the Mandatory Roth catch-up for high income earners?

Starting in 2026, and for the following years, if an employee makes more than $145,000 in W2 compensation (indexed for inflation) with the same employer in the previous year, that employee will no longer be allowed to make pre-tax catch-up contributions. If they make a catch-up contribution, it will be required to be a Roth catch-up contribution. 

Final Thoughts…

Whether you’re still decades from retirement or just a few years away, catch-up contributions are a crucial part of retirement planning for those age 50 and older. With the 2025 limits now in place and Roth rules continuing to evolve, understanding how these contributions fit into your broader plan can help you save smarter — and avoid costly mistakes.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What are catch-up contributions and who qualifies for them?
Catch-up contributions allow individuals age 50 and older to contribute additional funds to retirement accounts beyond the standard annual limits. For 2025, employees can contribute up to $23,500 to a 401(k) plus an extra $7,500 in catch-up contributions, for a total of $31,000 — provided they have sufficient earned income.

Can part-time workers make catch-up contributions?
Yes. As long as you have earned income and meet your employer plan’s eligibility requirements, you can make catch-up contributions even if you’re working part-time. The total contribution amount cannot exceed 100% of your W-2 compensation.

Are Roth catch-up contributions available?
If your employer plan offers a Roth option, you can make your catch-up contributions as Roth dollars. Roth contributions are made after tax, grow tax-free, and qualified withdrawals are also tax-free, offering flexibility for future tax planning.

How do catch-up contributions affect required minimum distributions (RMDs)?
Catch-up contributions do not change when RMDs begin, but the type of account matters. Pre-tax catch-up dollars increase your future RMDs, while Roth 401(k) contributions can be rolled into a Roth IRA before RMD age to avoid mandatory withdrawals altogether.

Should I prioritize catch-up contributions or pay down my mortgage?
It depends on your financial situation. If your mortgage rate is low (under 4%) and you’re behind on retirement savings, maximizing catch-up contributions may be beneficial. However, paying down your mortgage may make sense if you’re already on track for retirement and value being debt-free or if you have a higher interest rate on your mortgage.

What happens if I forget to increase my deferrals after turning 50?
Your employer’s payroll system won’t automatically adjust contributions, so you must update them manually. Missing the adjustment means forfeiting that year’s extra contribution opportunity — once the year ends, you can’t retroactively make up the difference.

What is the new enhanced age 60–63 catch-up contribution for 2025?
Starting in 2025, employees aged 60 to 63 can make a larger catch-up contribution of up to $11,250 to 401(k) and 403(b) plans, providing an additional savings boost in the final years before retirement.

What is the new rule for high-income earners and Roth catch-ups?
Beginning in 2026, employees earning more than $145,000 (indexed for inflation) in W-2 income with the same employer will be required to make catch-up contributions as Roth contributions — pre-tax catch-ups will no longer be allowed for this group.

401(k) Catch-Up Contributions Explained: Maximize Your Retirement Savings in 2025

For individuals aged 50 or older, catch-up contributions allow for additional retirement savings during what are often their highest earning years. With updated limits and new provisions taking effect in 2025, this strategy can be especially valuable for those looking to strengthen their financial position ahead of retirement and maximize tax efficiency in what are typically their highest income years leading up to retirement.

Below, I break down the 2025 catch-up contribution limits, rules, and strategic considerations to help you make informed decisions.

What Are Catch-Up Contributions?

Catch-up contributions allow individuals aged 50 or older to contribute above the standard annual limits to retirement accounts. You’re eligible to make catch-up contributions starting in the calendar year you turn 50.

2025 Contribution Limits

Here are the updated 2025 401(k) contribution limits for each plan type:

401(k), 403(b), 457(b):

• Standard limit: $23,500

• Age 50 – 59 & Age 64+ catch-up: $7,500

• Age 60 – 63 catch-up: $11,250

New 401(k) Age 60–63 Catch-Up Limits

Beginning in 2025, a new tier of higher catch-up limits will apply to individuals between ages 60 and 63. Under the SECURE 2.0 Act, these individuals can contribute an additional amount equal to 50% of the regular catch-up contribution for that plan year. For 2025, this equates to an extra $3,750, bringing the total possible contribution to $34,750 for 401(k), 403(b), and 457(b) plans. This enhanced catch-up contribution is optional for employers, so it's important to confirm with your plan sponsor whether this provision is available in your plan.

To learn more, read our article: New Age 60 – 63 401(k) Enhanced Catch-up Contribution Starting in 2025

Pre-Tax vs. Roth Catch-Up Contributions

Employer-sponsored retirement plans often allow participants to choose whether their catch-up contributions are made on a pre-tax or Roth (after-tax) basis. The best approach depends on income levels, expected tax rates in retirement, and broader financial planning goals.

Pre-tax contributions reduce your taxable income today but are taxed when withdrawn in retirement.

Roth contributions provide no current tax deduction but grow and distribute tax-free in retirement.

When Pre-Tax May Make Sense:

• You're in a high tax bracket today (e.g., 24%+)

• You expect to be a lower tax bracket during the retirement years

Example:

Tom is age 60, married, and earns $400,000 annually, placing him in the 32% federal tax bracket. In the next 5 years, Tom expects to retire and be in a lower federal tax bracket. By making pre-tax catch-up contributions now, it will allow him to reduce his current taxable income, while potentially taking distributions in a lower tax bracket later.

When Roth May Make Sense:

• You expect your current tax rate to be roughly the same in retirement

• You already have substantial pre-tax retirement account balances

• You expect tax rates to rising in the future

Example:

Susan is age 52, single filer, earns $125,000 per year, and is in the 22% tax bracket. She expects her income to remain steady over time. By choosing Roth catch-up contributions, she pays tax now at a relatively low rate and avoids taxation on future withdrawals.

Mandatory Roth Catch-Up Contributions for High Earners (Effective 2026)

Starting in 2026, individuals earning $145,000 or more (adjusted for inflation) in wages from the same employer in the previous year will be required to make catch-up contributions to their workplace plan on a Roth basis. This rule applies only to employer-sponsored plans (like 401(k)s) and does not impact Simple IRA plans. For 2025, these Roth rules have been delayed, giving high-income earners time to prepare.

To learn about the rules and exceptions for high earners, read our article: Mandatory 401(k) Roth Catch-up Details Confirmed by IRS January 2025

The Big Picture: Why This Strategy Matters Near Retirement

For individuals within five to ten years of retirement, catch-up contributions provide an opportunity to meaningfully increase retirement savings without relying on higher investment returns or making dramatic lifestyle changes. The added contributions also support strategic tax planning by allowing savers to choose between pre-tax and Roth treatment based on their broader income picture.

Catch-up contributions can help:

• Maximize tax-advantaged savings when your income is typically at its highest

• Take advantage of compound growth on a larger balance

• Strategically shift assets into Roth accounts for future tax-free income

Consider the numbers:

A 60-year-old contributing the full $34,750 annual catch-up amount for three consecutive years could accumulate over $111,000 in additional retirement savings, assuming a 7% annual return. If contributed to a Roth 401(k), those funds would grow and be distributed tax-free, offering valuable flexibility in retirement.

Even if retirement is only a few years away, catch-up contributions can play a significant role in improving retirement readiness and reducing future tax burdens.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What are catch-up contributions and who qualifies for them?
Catch-up contributions allow individuals aged 50 or older to contribute more to retirement accounts than the standard annual limit. Eligibility begins in the calendar year you turn 50, regardless of your income level or how close you are to retirement.

What are the 2025 catch-up contribution limits?
In 2025, employees can contribute up to $23,500 to a 401(k), 403(b), or 457(b) plan. Those aged 50–59 and 64 or older can contribute an additional $7,500, while individuals aged 60–63 can make an enhanced catch-up contribution of $11,250, for a total of $34,750 if allowed by their employer’s plan.

How does the new age 60–63 catch-up rule work?
Starting in 2025, individuals between ages 60 and 63 can make a higher catch-up contribution equal to 150% of the standard catch-up limit. This provision under the SECURE 2.0 Act lets older workers maximize savings during their final working years, but availability depends on whether an employer adopts the rule.

Should I make my catch-up contributions pre-tax or Roth?
The best option depends on your tax situation. Pre-tax contributions reduce taxable income now and are ideal if you expect to be in a lower tax bracket in retirement. Roth contributions are made after-tax but grow tax-free and are advantageous if you expect future tax rates to rise or your income to remain steady.

What is the mandatory Roth catch-up rule for high-income earners?
Beginning in 2026, employees earning $145,000 or more (adjusted for inflation) from the same employer in the previous year must make catch-up contributions on a Roth basis. This means contributions will be made after tax, and future withdrawals will be tax-free.

Why are catch-up contributions especially important near retirement?
Catch-up contributions help individuals nearing retirement boost savings during peak earning years without depending solely on market growth. They also provide tax planning flexibility by letting savers choose between pre-tax and Roth options based on their expected future income and tax rates.

Should You Make Pre-tax or Roth 401(k) Contributions?

When you become eligible to participate in your employer’s 401(k), 403(b), or 457 plan, you will have to decide what type of contributions you want to make to the plan.  Most employer-sponsored retirement plans now offer employees the option to make either Pre-tax or Roth contributions.   A number of factors come into play when deciding what source is the right one for you, including:

• Age

• Income level

• Marital status

• Income needed in retirement

• Withdrawal plan in retirement

• Abnormal income years

You must consider all of these factors before making the decision to contribute either pre-tax or Roth to your retirement plan.

Pre-tax vs Roth Contributions

First, let’s start off by identifying the differences between pre-tax and Roth contributions.  It’s pretty simple and straightforward.  With pre-tax contributions, the strategy is “don’t tax me on it now, tax me on it later”.  The contributions are deducted from your gross pay; they deduct FICA tax, but they do not withhold federal or state tax, which, in doing so, you are essentially lowering the amount of your income that is subject to federal and state income tax in that calendar year. The full amount is deposited into your 401K, the balance accumulates tax deferred, and then, when you retire and pull money out, that is when you pay tax on it.  The tax strategy here is taking income off the table when you are working and in a higher tax bracket, and then paying tax on that money after you are retired, your paychecks have stopped, and you are hopefully in a lower tax bracket.

With Roth contributions, the strategy is “pay tax on it now, don’t pay tax on it later”.  When your contributions are deducted from your pay, they withhold FICA, as well as Federal and State income tax, but when you withdraw the money in retirement, you don’t have to pay tax on any of it INCLUDING all of the earnings.

Age

Your age and your time horizon to retirement are a big factor to consider when trying to decide between pre-tax or Roth contributions.  In general, the younger you are and the longer your time horizon to retirement, the more it tends to favor Roth contributions because you have more years to build the earning in the account which will eventually be withdrawn tax-free.  In contrast, if you’re within 10 years to retirement, you have a relatively short period of time before withdrawals will begin from the account, making pre-tax contributions may make the most sense.

When you end up in one of those mid time horizon ranges like 10 to 20 years to retirement, the other factors that we’re going to discuss have a greater weight in arriving at your decision to do pre-tax or Roth.

Income level

Your level of income also has a big impact on whether pre-tax or Roth makes sense.  In general, the higher your level of income, the more it tends to favor pre-tax contributions. In contrast, lower to medium levels of income, can favor Roth contributions. Remember pre-tax is “don’t tax me on it now, tax me on it later”, and the strategy is you are assuming that you are in a higher tax bracket now during your earning years then you will be in retirement when you don’t have a paycheck. By contrast, a 22 year old, that has accepted their first job, will most likely be at the lowest level of income over their working career, and have the expectation that their earnings will grow overtime.  This situation would favor making Roth contributions because you are paying tax on the contributions while you are still in a low tax bracket and then later on when your income rises, you can switch over to pre-tax.  

Marital status

Your marital status matters because if you’re married and you file a joint tax return, you have to consider not just your income but your spouse’s income. If you make $30,000 a year, that might lead you to think that Roth is a good option, but if your spouse makes $200,000 a year, your combined income on your joint tax return is $230,000 which puts you in a higher tax bracket.  Assuming you’re not going to need $230,000 per year to live off of in retirement, pre-tax contributions may be more appropriate because you want the tax deduction now.

A change in your marital status can also influence the type of contributions that you’re making to the plan. If you are a single filer making $50,000 a year, you may have been making Roth contributions but then you get married and your spouse makes $100,000 a year, since your income will now be combined for tax filing purposes, it may make sense for you to change your elections to pre-tax contributions.

These changes can also take place when one spouse retires and the other is still working. Prior to the one spouse retiring, both were earning income, and both were making pre-tax contributions. Once one of the spouses retires the income level drops, the spouse that is still working may want to switch to Roth contributions given their much lower tax rate.

Withdrawal plan in retirement

You also have to look ahead to your retirement years and estimate what your income picture might look like.  If you anticipate that you will need the same level in retirement that you have now, even though you might have a shorter time horizon to retirement, it may favor making Roth contributions because your tax rate is not anticipated to drop in the retirement years. So why not pay tax on the contributions now and then receive the earnings on the account tax-free, as opposed to making pre-tax contributions and having to pay tax on all of it.  The benefit associated with pre-tax contributions assumes that you’re in a higher tax rate now and when you withdraw the money you will be in a lower tax bracket.

Some individuals accumulate balances in their 401(k) accounts but they also have pensions.  As they get closer to retirement, they realize between their pension and Social Security, they will not need to make withdrawals from their 401(k) account to supplement their income.  In many of those cases, we can assume a much longer time horizon for those accounts which may begin to favor Roth contributions. Also, if those accounts are going to continue to accumulate and eventually be inherited by their children, from a tax standpoint, it’s more beneficial for children to inherit a Roth account versus a pre-tax retirement account because they have to pay tax on all of the money in a pre-tax retirement account as some point.

Abnormal income years

It’s not uncommon during your working years to have some abnormal income years where your income ends up being either significantly higher or significantly lower than it normally is.  In these abnormal years it often makes sense to change your pre-tax or Roth approach. If you are a business owner, you typically make $300,000 per year, but the business has a bad year, and you’re only going to make $50,000 this year, instead of making your usual pre-tax contributions, it may make sense to contribute Roth that year.  If you are a W-2 employee, and the company that you work for is having a really good year, and you expect to receive a big bonus at the end of the year, if you’re contributing Roth it may make sense to switch to pre-tax anticipating that your income will be much higher for the tax year.

Another exception can happen in the year that you retire.  Some companies will issue bonuses or paid out built up sick time or vacation time which can count as taxable income. In those years it may make sense to make larger pre-tax contributions because the income in that final year may be much higher than normal.

Frequently Asked Questions About Roth Contributions

When we are educating 401K plan participants on this topic, there are a few frequently asked questions that we receive:

Do all retirement plans allow Roth contributions?

ANSWER:  No, Roth contributions are a voluntary contribution source that a company has to elect to offer to its employees.  We are seeing a lot more plans that offer this benefit but not all plans do.

Can you contribute both Pre-Tax and Roth at the same time to the plan?

ANSWER:  Yes, if your plan allows Roth contributions you are normally able to contribute both pre-tax and Roth to the plan simultaneously.  However, the annual deferral limits are aggregated for purposes of all employee elective deferrals. For example, in 2025, the maximum employee deferral limits are as follows:

• Under the age of 50:  $23,500

• Age 50-59 and 64 and over: $31,000

• Age 60-63: $34,750

You can contribute all pre-tax, all Roth, or any combination of the two but those amounts are aggregated together for purposes of assessing the annual dollar limits.

Do you have to set up a separate account for your Roth contributions to the 401K?

ANSWER: No. The Roth contributions that you make out of your paycheck to the plan are just tracked as a separate source within the 401K plan. They have to do this because when it comes to withdrawing the money, they have to know how much of your account balance is pre-tax and what amount is Roth.  Typically, on your statements, you will see your total balance, and then it breaks it down by money type within your account.

What happens when I retire and I have Roth money in my 401K account?

ANSWER:  For those that contribute Roth to their accounts, it's common for them to have both pre-tax and Roth money in their account when they retire.  The pre-tax money could be from employee deferrals that you made or from the employer contributions.  When you retire, you can set up both a rollover IRA and a Roth IRA to receive the rollover balance from each source.

SPECIAL NOTE:  The Roth source has a special 5 year holding rule.  To be able to withdraw the earnings from the Roth source tax free, you have to be over the age of 59 ½ AND the Roth source has to have been in existence for at least 5 years.  Here is the problem, that five-year holding clock does not transfer over from a Roth 401(k) to a Roth IRA.  If you did not have a Roth IRA a prior to the rollover, you would have to re satisfy the five-year holding period within the Roth IRA before making withdraws.  We normally advise clients in this situation that they should set up a Roth IRA with $1 five years prior to retirement to start that five-year clock within the Roth IRA so by the time they rollover the Roth 401(k) balance they are free and clear of the 5 year holding period requirement. (Assuming their income allows them to make a Roth IRA contribution during that $1 year)

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What’s the difference between pre-tax and Roth contributions in a 401(k), 403(b), or 457 plan?
Pre-tax contributions reduce your taxable income now—you defer paying taxes until retirement when you withdraw the money. Roth contributions are made after taxes, meaning you pay taxes upfront, but qualified withdrawals in retirement (including earnings) are tax-free.

How does age influence whether you should contribute pre-tax or Roth?
Generally, younger workers with longer time horizons benefit more from Roth contributions because their investments can grow tax-free for decades. Those closer to retirement often prefer pre-tax contributions to reduce taxes while earning income and defer taxation until retirement.

Does income level affect whether to choose pre-tax or Roth contributions?
Yes. Higher earners often benefit more from pre-tax contributions because they receive a larger tax deduction now and may be in a lower tax bracket later. Workers in lower or moderate tax brackets may prefer Roth contributions since they’re paying tax at relatively low rates today.

How does marital status impact pre-tax vs Roth decisions?
Married couples filing jointly must consider combined income. If one spouse earns significantly more, the higher joint tax bracket may favor pre-tax contributions. However, when a spouse retires or income drops, switching to Roth contributions may make sense to take advantage of lower tax rates.

What if I expect to have the same income in retirement?
If you expect to maintain similar income levels in retirement—due to pensions, Social Security, or investment withdrawals—Roth contributions may be advantageous. Paying taxes now locks in today’s rates and provides tax-free withdrawals later.

Should I adjust my contribution type during abnormal income years?
Yes. In unusually high-income years, pre-tax contributions can help reduce taxable income. In lower-income years—such as a slow business year or partial-year retirement—it may make sense to switch to Roth contributions and pay taxes at a lower rate.

Can I contribute to both pre-tax and Roth sources at the same time?
Yes, most plans allow you to split your contributions between pre-tax and Roth. However, the combined total can’t exceed the annual IRS deferral limits ($23,500 for those under 50; up to $34,750 for those aged 60–63 in 2025).

Do I need a separate account for Roth 401(k) contributions?
No. Both pre-tax and Roth balances are held within the same plan but tracked separately. Your statements will show how much of your balance is Roth versus pre-tax for proper tax treatment at withdrawal.

What happens to my Roth 401(k) when I retire?
At retirement, you can roll your pre-tax funds to a traditional IRA and your Roth funds to a Roth IRA. Keep in mind that Roth IRAs have a five-year rule—you must have held a Roth IRA for at least five years before earnings can be withdrawn tax-free.