The Underrated Way People Over 50 Can Boost Their Retirement Savings

According to the investment firm Fidelity, Americans should have six times their annual income socked away in a retirement account at age 50. In others words, a 50 year old worker earning $70,000 per year will ideally have a 401(k) or Individual Retirement Account (IRA) containing $420,000 or more. Folks falling short of that goal are advised to start saving more of their income through budgeting — perhaps even by taking advantage of a top-rated budgeting app. Alternately, or in addition to budgeting, underinvested individuals can also boost their income through a side gig for extra money or by working overtime, if possible.

The good news is that once you begin accumulating more funds to invest, the IRS allows what's known as "catch-up" contributions for workers nearing retirement age. Like the name implies, this policy helps older workers who previously didn't save enough, or those who are adequately prepared but simply want to contribute more. Even though catch-up contributions have been around since 2001, not all investors are aware of this opportunity, which is available to those who are age 50 and older. With that in mind, there can be a lot to know — like how catch-up contribution limits frequently change to account for inflation.

To illustrate how catch-up contributions work, take note that all employees are able to contribute a maximum of $23,500 a year to their company-sponsored 401(k) plans, as of 2025. However, workers age 50 or older can contribute an extra $7,500 per year under the current rules, for $31,000 total. Additionally, workers who are aged 60, 61, 62 and 63 can make even larger catch-up contributions – $11,250 in excess of the regular $23,500 limit.

It's not only 401(k) retirement plans which are eligible for these catch-up contributions, either. Owners of certain types of employment-specific retirement accounts such as 403(b) and 457 plans can also contribute extra after age 50. Workers who aren't eligible for a 401(k) plan, such as freelancers or independent contractors, might want to consider learning how to open an IRA instead. As well, IRAs can be opened in addition to 401(k) accounts for workers that really want to supercharge their retirement savings. In either case, IRAs also allow larger catch-up contributions for folks over 50, but the limits are lower than those for a 401(k).

For 2025, the IRA catch-up rules allow for an extra $1,000 to be added in addition to the normal $7,000 annual contribution limit. It's important to note that this limit applies to all IRA accounts held by an investor, not for each account. For example, if you have a regular IRA and a Roth IRA, the current annual contribution limit for a 50-plus investor is $8,000 between both of those accounts. This means you could put $3,000 into one account and $5,000 into the other. If you accidentally contribute too much to your IRA account, you'll need to promptly remove the excess funds – and any profit or returns generated by those funds — which will then be taxed as regular income.

Finally, it can't be emphasized enough to take advantage of matching contributions into a retirement account – if your employer offers this perk. According to the investment company Vanguard, the average employer match in 2024 was 4.6%. For an employee earning $60,000 per year, that equates to $2,760 in free money. Even if you can't afford to max out your retirement account contributions, you should prioritize contributing at least up to the limit that your employer matches. That way, you could potentially avoid the worry of needing to catch-up at age 50-plus.