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Roth IRA Catch Up Contributions

Can you make Roth IRA catch up contributions?

If you're approaching retirement anytime soon, this is a very important question. After all, every extra dollar you set aside in your Roth IRA today grows tax-free year after year, and in some cases, well into your retirement years.

So the benefit of making catch up contributions can NOT be overstated.


Because, as you approach retirement, your greatest asset dwindles away.

What asset is that?


Early in your working life, time is on your side.

For instance, a $5,000 Roth IRA contribution at age 20 that grows 8% annually for 40 years ends up being $108,622.60.

But a $5,000 Roth IRA contribution at age 50 that grows 8% annually for only 10 years ends up being $10,794.62.

In both cases, the initial contribution amount is $5,000. But an extra 30 years makes $97,827.98 worth of difference.

So what's the lesson here?

Start saving early for your retirement.

But what if it's too late to start early? Is all hope lost?


That's why the IRS allows Roth IRA "catch up" contributions.

You may not be able to make up all of the lost ground from failing to act early, but an extra 20% socked away each year can make a substantial difference in your retirement.

How Much Is The Roth IRA Catch-Up Contribution?

The Roth IRA catch up contribution is an additional $1,000 on top of your normal maximum annual contribution.

If you're eligible to make a Roth IRA catch up contribution, then as a general rule, you can contribute $1,000 more than the maximum Roth IRA contribution if you weren't eligible to make a catch up contribution.

For example, let's say two individuals both earn $68,000 per year. Both are eligible to contribute an annual maximum of $5,500 to a Roth IRA.

However, let's say one of those individuals is eligible to make a catch up contribution...

What is the maximum annual contribution that individual can make?



Because $5,500 plus an extra $1,000 is $6,500.

Does that mean the catch up contribution is always $1,000?


It is when you make the maximum annual contribution for your age, but...

It's NOT the case when you're making the maximum annual contribution allowed for your income level.


Because, as your annual income increases, your ability to contribute to your Roth IRA gradually phases out.

As a result, if you're eligible to contribute zero to your Roth IRA, you can't make a catch up contribution of $1,000.


Because even if you meet the eligibility requirements, you can't contribute anything to your Roth if your Modified Adjusted Gross Income (MAGI) is too high.

For example, let's say you and your friend both earn $112,500. As a result, each of you can make a maximum annual Roth IRA contribution of $2,500.

However, you're eligible for a Roth IRA catch up contribution and your friend is not.

What is the maximum you can contribute?



The $2,500 maximum contribution plus an extra $500 (50% of $1,000) equals $3,500.

So in this case, the Roth IRA catch up contribution amounts to $500 instead of $1,000.

How Do You Qualify For a Catch-Up Contribution?

The Roth IRA catch up contribution is available to individuals 50 years old and older, although it's not always labeled a "catch up" contribution.

Sometimes, the limits are just stated in the following manner...

The Roth IRA maximum contribution is:

  • $5,500 if you're younger than 50 years old
  • $6,500 if you're 50 years old or older

So while a Roth IRA contribution may not be explicitly called a "catch-up" contribution, the fact remains that the closer you are to retirement, the more money you're able to contribute to your Roth IRA on an annual basis.

For instance, say you're 25 years old and earn $65,000 per year. Under IRS rules governing Roth IRA contribution limits, you're eligible to make a maximum annual contribution of $5,500.

But if, at the age of 50, you earned the same amount of income, then you're eligible to make a maximum contribution of $6,500.


Because you can make the same $5,000 contribution as the 25 year old, but you get to make an additional $1,000 catch up contribution because you're 50 years old or older.


Roth IRA catch up contributions are available if you're 50 years old or older.

As the theory goes, since you're closer to retirement, the ability to make an extra contribution to your Roth IRA will help you "catch up" to where you should be if you hope to have an adequately funded retirement.

As a general rule, the Roth IRA catch up contribution is an additional $1,000 on top of what you otherwise qualify to contribute.

Regardless of how early you start saving for retirement, you should always contribute as much as possible to your Roth IRA.


There's simply no other place where you can grow your savings tax-free and then withdraw those funds tax-free in retirement...

So if you don't contribute the maximum to your Roth IRA, you're essentially turning down the opportunity to invest your money without ever having to pay a dime in taxes on that money again. And don't you like tax-free money?

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