401(k) Contribution Limits 

If your employer offers a 401(k) plan, it is the most common and the simplest and effective ways to save for  retirement. The major advantage of 401(k) plans is that they let you put a portion of your pay pretax and it is automatically deposited into your account; however, the government plays a part in where they determine how much that you can contribute to your 401(k) each year. 

On a yealry basis the Internal Revenue Service (IRS) approximately in October/November, determines if they contribution limite will be modifed. These amounts have only increased over time. For example, in 2006 the maximum contribution was $15,000. As of 2021, this amount was $19,500. 

Catch-up Contributions

The IRS also allow for catch-up contributions which means that in the year that you turn 50 you can make additional contributions to 401(k) accounts and individual retirement accounts (IRAs). Hence, this means by choosing to add additonal money to the retirement plan, the total contribution will be larger than the standard contribution limit.


The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) designed the catch-up contribution to allow older workers to set aside more earnings to pad their retirement nest egg

The catch-up contribution allows for an additional $6,500 on top of the $19,500 for a maximum total of $26,000. For a Roth IRA or a traditional IRA, the maximum contribution amout was $6,000; however, the catch-up contribution allows for an additional $1,000 bringing the maximum amount to $7,000 per calendar year. 

The 50-year old Catch Up Contribution Rule Explained 

The rule for being 50 years of age to take advantage of the catch-up contribution means that you can qualify under this rule in the year that you become 50. For example, if turn 50 on December 31st, you could technically contribute another $1,000 before January 1st.

In addition, the IRS allows for contributions to be made up to the traditional tax filing deadline in the next calendar year. For example, after December 31st, 2020, you'd have until April 15th, 2021 to make contributions for the 2020 tax year.