For many people, the years just before retirement are also their highest earning years. Children may be out of the house, a mortgage may be close to paid off, and there is finally room in the budget to save more. Catch up contributions are designed for exactly this stage, allowing savers who reach the eligible age to put additional money into certain retirement accounts above the standard annual limits. Recent rule changes have added new wrinkles, especially around Roth treatment for higher earners. Whether you live in Eau Claire, Wausau, Sheboygan or elsewhere in Wisconsin, a complimentary, no-obligation wealth and tax review can help you see how these opportunities fit your plan.
What Are Catch Up Contributions?
Catch up contributions are additional amounts the IRS allows older savers to contribute to eligible retirement accounts beyond the regular annual limit. Eligibility generally begins in the calendar year you reach the age set by the IRS, and the extra amount depends on the type of account. Annual limits apply and are adjusted periodically, so check current IRS rules each year rather than relying on old figures.
The idea is straightforward: people who started saving late, took time away from work, or simply want to strengthen their retirement picture get a window to accelerate savings. Because contributions may be tax-deferred or, in Roth accounts, potentially tax-free when withdrawn under qualifying rules, the extra room can carry both wealth-building and tax planning value.
Which Accounts Allow Catch-Up Savings?
Several account types offer catch-up provisions, each with its own rules:
401(k), 403(b) and governmental 457(b) plans. These workplace plans generally allow catch-up deferrals on top of the regular employee deferral limit, if the plan permits. Some plans may also offer an enhanced catch-up amount for savers in a specific age band in their early sixties. Our overview of what a 401(k) is covers the basics.
SIMPLE IRAs. Catch-up amounts are available but follow separate, generally lower limits.
Traditional and Roth IRAs. IRAs allow a smaller catch-up amount. Roth IRA eligibility is still subject to income thresholds, which is why some higher earners explore a backdoor Roth IRA.
Health savings accounts. HSAs have their own catch-up provision tied to a different eligibility age, and contributions generally stop once you enroll in Medicare. Our article on using an HSA as a retirement account explains why some families treat it as a long-term savings tool.
Business owners may have additional options through a solo 401(k) or other employer plans, where catch-up deferrals can be layered on top of employer contributions.
Roth Considerations for Catch Up Contributions
One of the most significant recent changes affects how some workplace catch-up contributions are taxed. Under rules from the SECURE 2.0 Act, employees whose wages from the sponsoring employer exceed an income threshold generally must make catch-up contributions to a Roth account inside the plan rather than on a pre-tax basis. Income thresholds apply and are indexed, and implementation details have been phased in, so check current IRS rules and your plan's provisions.
What this means in practice:
Less immediate tax savings for affected earners. Roth catch-up contributions do not reduce current taxable income.
Potential tax-free withdrawals later. Qualified Roth withdrawals may be tax-free, which can add flexibility in retirement and may help manage future taxable income.
Plan design matters. If a plan does not offer a Roth option, affected employees may not be able to make catch-up contributions in that plan at all.
State taxes still count. Wisconsin's treatment of contributions and withdrawals should be part of the analysis.
For savers below the threshold, choosing between pre-tax and Roth catch-up contributions is often a judgment about current versus expected future tax rates, the size of existing pre-tax balances, and plans for required minimum distributions and Social Security. Having a mix of pre-tax, Roth and taxable assets may give you more control over income in retirement.
Connecting Catch-Up Savings to Your Broader Plan
Catch-up decisions work best when they are part of a coordinated plan rather than an automatic payroll election. Integrated wealth management looks at how extra savings affect your investment mix, emergency reserves, and the timeline for retirement. On the tax side, it considers how contributions change taxable income today and how withdrawals may be taxed later.
A few questions worth asking:
Is your cash reserve adequate before you increase deferrals?
How will extra pre-tax savings affect future required distributions and Medicare premium surcharges?
Does it make sense to pair Roth catch-up contributions with Roth conversions in lower income years?
Are investments inside retirement accounts positioned with an appropriate level of risk for your timeline?
Our article on retirement tax planning for Wisconsin retirees explores how withdrawal sequencing and state rules come together. You can also use the Compound calculator to see how additional contributions might grow over time. Any results are hypothetical and are meant for illustration, not a projection of actual results.
For couples, coordination matters too. One spouse may have access to a plan with an enhanced catch-up window while the other relies on an IRA. Looking at both households' accounts together, and including any beneficiary designations, can help keep savings and transfer goals aligned. Beneficiary decisions should be coordinated with an estate attorney as part of a broader estate plan.
Next Steps
Catch up contributions can be a valuable way to strengthen retirement savings in your peak earning years, but the right approach depends on your income, account types, tax picture and retirement timeline. Whether you are in Eau Claire, Wausau, or anywhere in Wisconsin and surrounding areas, we can help you weigh pre-tax and Roth choices alongside your investment strategy. Request a complimentary wealth and tax review to talk through your options.
Frequently Asked Questions
When can I start making catch up contributions?
Eligibility generally begins in the calendar year you reach the age the IRS sets for catch-up contributions. The specific rules vary by account type, so check current IRS rules.
Do I have to make my 401(k) catch-up contributions as Roth?
Employees whose wages exceed an income threshold generally must make workplace catch-up contributions as Roth under recent rules. Others may typically choose between pre-tax and Roth if the plan allows.
Can I make catch-up contributions to both a 401(k) and an IRA?
Generally yes. Workplace plan and IRA catch-up limits are separate, though IRA deductibility and Roth IRA eligibility depend on income thresholds.
Are catch-up contributions available in an HSA?
HSAs have their own catch-up provision with a separate eligibility age. Contributions generally end once you enroll in Medicare.
Should I prioritize catch-up savings over paying down debt?
It depends on interest rates, cash reserves, tax considerations and goals. A coordinated review of both investments and taxes can help you weigh the tradeoffs.
Compound is a registered investment adviser. Registration does not imply a certain level of skill or training. This article is for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. Tax laws are complex and subject to change. Strategies discussed may not be suitable for everyone, and there is no guarantee that any strategy will achieve its objectives or reduce taxes. Calculator results are hypothetical, are not guarantees of future results, and do not reflect any actual investment. Investing involves risk, including possible loss of principal. Please consult your tax, legal, and financial professionals before acting on any information in this article. For more information, see Compound's Form ADV, available at adviserinfo.sec.gov.
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About Compound Wealth
Compound Wealth works with business owners, entrepreneurs, professionals, and families with increasingly complex financial lives. The firm brings together tax planning, wealth management, client accounting services, and business transition advisory to provide a coordinated planning experience. By evaluating multiple aspects of a client's financial picture together, planning discussions may become more structured and aligned with long-term goals.
