A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Asset Preservation Capital, LTD, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone call.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Asset Preservation Capital, LTD
(248) 649-4759

By Ian Berger, JD
IRA Analyst

Who says getting old is all bad? Once you reach a certain age, Congress rewards your longevity by letting you contribute an extra amount to your IRA or workplace savings plan – with no strings attached. It’s a great way to boost your nest egg and get an immediate tax break if making pre-tax deferrals (or a tax break down the road if making Roth contributions).

Age 50 catch-up for IRAs. If you’re age 50 or older by the end of a year, you can contribute an additional $1,000 to a traditional or Roth IRA for that year. For 2019, this means you can make a total IRA contribution of up to $7,000 – as long as you are otherwise eligible for the IRA.

Age 50 catch-up for workplace plans. Most age 50 or older workplace plan participants can defer an additional amount beyond the regular annual limit ($19,000 for 2019) to the plan. The catch-up contribution limit, which is indexed periodically, is $6,000 for 2019. So, you can make total deferrals of up to $25,000 for 2019.

Despite their name, age 50 catch-up contributions are available even if you’ve contributed the maximum amount in all prior years. And, you can use the age 50 catch-up for workplace plans even if you also use the age 50 catch-up for IRAs.

Additional catch-up for 403(b) plan participants. A 403(b) plan may allow participants with at least 15 years of service to make up to an additional $3,000 of annual catch-up contributions. There is no age requirement for this catch-up, and it can be used on top of the age 50 catch-up. However, there is a lifetime limit of $15,000.

Catch-up for 457(b) plans. A 457(b) plan can be sponsored by either a governmental employer or a tax-exempt employer. If you’re age 50 or older, you can defer up to an additional $6,000 only if you’re in a governmental plan.

However, both types of 457(b) plan may allow you to defer an even higher catch-up amount in the last three years before your retirement. For those three years, your catch-up amount could be as high as the normal deferral limit. For example, you may be able to defer as much as $38,000 ($19,000 + $19,000 catch-up) in 2019 – a real windfall.

Two caveats: First, the three-year catch-up for 457(b) plans is a true “catch-up,” meaning that it’s limited to unused deferrals from prior years. If you have been deferring the maximum amount in all prior years of employment, this catch-up isn’t available. Second, you can’t use both the three-year catch up and the age 50 catch-up in the same year.

So, while enjoying your hot dogs and burgers at your Labor Day cookout this weekend, by all means don’t forget the “catch-up.” You’ll “relish” the additional savings opportunity.