The year in which I turn 50, catchup contributions

[exigent]

I awoke this morning in 2021, which is the year in which I turn 50. I have been been looking forward to this in a weird sort of way b/c it means I can start making catchup contributions to my retirement accounts. My wife beat me to it, and has stashed an extra $1k in her Roth the past two years. But this makes a much bigger difference for me b/c I have more retirement accounts at my disposal.

To be fair, these aren’t really “catchup” contributions for us, as we’ve been saving aggressively and aren’t really catching up. But we can afford to continue stashing, so we are... This year will include:

• $7k to his/hers Roth (via the backdoor*)
• $7,200 to HSA (which we accumulate/invest)
• ca.$12k in mandatory 401(a) contributions
• ca. $18k in employer match to 401(a)
• $26k to optional 403(b)
• $26k to optional 457(b)

*Note: Backdoor might not end up being necessary, but I don’t want to have to think about it.

We’ve debated doing some of this as Roth contributions but have ultimately decided against it. Thus, aside from the Roth IRAs and HSA, all contributions will be traditional/deductible.

What about the rest of you? If you’re 50+ are you taking advantage of the available catchup contributions? If you’re not there yet, do you plan on doing so? Or, if you’re already retired, did you do so prior to retirement?

Happy New Year!

[HomeStretch]

HSA catch-up is age 55+ so you have that to look forward to in a few years!

[AlienGrrrl]

I've been taking advantage, and like you have always maxed out my retirement accounts (I don't have an HSA). Several years ago my employer started allowing Roth contributions into the 457 plan; at first I was doing 50% tIRA and 50% Roth but a few years ago I started doing 100% Roth. I'm taking the tax hit now but am OK with it; I still have a solid amount in the pre-tax account, and when I retire will need to decide if it's advantageous to convert any of that to Roth, but I still have a bunch of years to think that over and do more research.

I'm in your same boat re: the 2021 Roth IRA, backdoor might not be necessary but I'm trying to figure out how to best handle that now to avoid unnecessary paperwork/annoyance in a year.

[Affable at 50]

I awoke this morning in 2021, which is the year in which I turn 50. I have been been looking forward to this in a weird sort of way b/c it means I can start making catchup contributions to my retirement accounts. My wife beat me to it, and has stashed an extra $1k in her Roth the past two years. But this makes a much bigger difference for me b/c I have more retirement accounts at my disposal.

To be fair, these aren’t really “catchup” contributions for us, as we’ve been saving aggressively and aren’t really catching up. But we can afford to continue stashing, so we are... This year will include:

• $7k to his/hers Roth (via the backdoor*)
• $7,200 to HSA (which we accumulate/invest)
• ca.$12k in mandatory 401(a) contributions
• ca. $18k in employer match to 401(a)
• $26k to optional 403(b)
• $26k to optional 457(b)

*Note: Backdoor might not end up being necessary, but I don’t want to have to think about it.

We’ve debated doing some of this as Roth contributions but have ultimately decided against it. Thus, aside from the Roth IRAs and HSA, all contributions will be traditional/deductible.

What about the rest of you? If you’re 50+ are you taking advantage of the available catchup contributions? If you’re not there yet, do you plan on doing so? Or, if you’re already retired, did you do so prior to retirement?

Happy New Year!

I turned 50 last year so in January 2020 I increased my contributions to my 401k (all pretax) and my Roth IRA.

I like to think that I am on track to reach financial independence in a few years and to retire by 2030. The catch up contributions certainly help turbo charge the retirement savings.

[Wiggums]

“the catch up contributions certainly help turbo charge the retirement savings.”

I stole this response because it really says it all.

[frugalecon]

I have had the opportunity to do catch-ups for several years now, and I have been taking advantage of them. In my 401k-type plan (actually TSP, since I am a Fed), I have been allocating the catch-up amount to Roth while continuing to save the rest in Traditional. But I am changing my approach. I have now reached my FI goal, even though I have 4-5 years until likely retirement. At the same time, tax-deferred balances have ballooned, so I am contributing only to Roth in TSP (though the employer portion still goes into Traditional). Because I have met my goals, I am not going to sweat maxing out. Instead, I am going to contribute a reasonable amount and use some of the extra cash flow to address some home maintenance/improvement projects, with an eye to preparing the house for retirement.

[backpacker61]

What about the rest of you? If you’re 50+ are you taking advantage of the available catchup contributions? If you’re not there yet, do you plan on doing so? Or, if you’re already retired, did you do so prior to retirement?

I am 9-10 years older than you, and I've been doing the catch-ups since the year I turned 50. Fortunately, I paid my home mortgage off at 49; otherwise I would have found it a struggle to afford to do the catch-up contributions out of work compensation. I predict you will look back on this and be glad that you made this choice.

As another mentioned, at 55, you can begin a 1K$ catch-up to the HSA. My employer didn't allow me to actually increase the HSA contribution amount until the month after I actually turned 55, so that made calculating the correct deduction amount a little complicated that year; requiring a mid-year adjustment.

Now I'm looking forward to buying an 'America the Beautiful - Lifetime Senior Pass' (for visiting National Parks) in a few years (age 62). It's not the sweet deal it was a few years ago, but still pretty good.

[lazynovice]

Got up this morning to log in to my 401(k) account to enter the catch up contribution. That is what passes for excitement around my house these days. I will up the Roth when I do our backdoor contributions later in the month. My husband retired before he could do the catch up in 401(k) but he has done the increased Roth for two years now.

[sergeant]

My plan (and DW's) allowed double catchup contributions in our 457b accounts. Check on your plan, you might be able to sock away even more.

I do wish that we had split contributions between Roth and Traditional in the 457b the last few years of employment. We have generous pensions but are able to do conversions the last few years that makes sense for our situation.

[sc9182]

For folks MFJ status with under-18 minor kids as dependents could be partially phased-out of $2000 Child Tax Credit — if their MFJ income crosses $200k-250k !! So, doing Traditional contribution of $6500 May be more helpful to control AGI than going with Roth401k catch-up contribution.

I think you lose $250 approx for each minor kid’s child tax credit if you are in the phase-our ranges. Just saying ..(somebody check the phase-out math) ..

Thanks

[imyeti2]

Is the requirement to turn 50 anytime in 2021? So if I turn 50 on Dec 31, 2021, will I be able to make 6.5 K more in contributions in 2021?

[ThisTimeItsDifferent]

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

[Smilodon]

Got up this morning to log in to my 401(k) account to enter the catch up contribution.

Me too! First year I am eligible for "catch-up " contributions. Make hay while the sun shines, as the saying goes.

[lazynovice]

Is the requirement to turn 50 anytime in 2021? So if I turn 50 on Dec 31, 2021, will I be able to make 6.5 K more in contributions in 2021?

Yes. And an additional 1k to Roth.

[Plano]

For folks MFJ status with under-18 minor kids as dependents could be partially phased-out of $2000 Child Tax Credit — if their MFJ income crosses $200k-250k !! So, doing Traditional contribution of $6500 May be more helpful to control AGI than going with Roth401k catch-up contribution.

I think you lose $250 approx for each minor kid’s child tax credit if you are in the phase-our ranges. Just saying ..(somebody check the phase-out math) ..

It’s $400k (https://www.irs.gov/newsroom/child-tax- ... he-numbers) but your point is valid. If you can squeak under $400k after you contribute $26k x2 pre-tax 401(k) with catch-up, that $2k credit is a great reason to do so.

[an_asker]

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

[retire2022]

Op

Congrats turning 50 the Catch Up will be an option on Vanguard app, I went to check on my app and the $7000 was available TONIGHT for 2021.

Low and behold I was able to transfer cash from my existing balance of my taxable brokerage account at 9:15PM Jan 1, 2021 and it is ready for Monday's opening bell Jan 4, 2020 now in my Roth account balance.

Yahoo!

[jsprag]

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

You must have had your 50th or higher birthday within the taxable year to be “catch-up eligible”.

Reference: Treas. Reg. 1.414(v)-1(g)(3)

[retire2022]

You must have had your 50th or higher birthday within the taxable year to be “catch-up eligible”.

Reference: Treas. Reg. 1.414(v)-1(g)(3)

The Vanguard App will include the Catch-up addition as a maximum contribution for IRA, if the op is 50 this year, then the option is available, the amount is $7000 for over 50.

[Spirit Rider]

My plan (and DW's) allowed double catchup contributions in our 457b accounts. Check on your plan, you might be able to sock away even more.

The 457b double catch-up provision only applies to the three years prior to "normal retirement age" (NRA) Does your plan set a specific NRA or allow the participant to set their own NRA?

[jsprag]

You must have had your 50th or higher birthday within the taxable year to be “catch-up eligible”.

Reference: Treas. Reg. 1.414(v)-1(g)(3)

The Vanguard App will include the Catch-up addition as a maximum contribution for IRA, if the op is 50 this year, then the option is available, the amount is $7000 for over 50.

The very specific question posed by an_asker is if suggestion by ThisTimeItsDifferent is that someone who had their 50th birthday on Jan 1, 2021 can make catch-up contributions in tax year 2020.

Are you saying that in general the Vanguard app recognizes when someone turns 50 and reflects the higher limit, or that the Vanguard app explicitly reflects a $7,000 limit in 2020 contributions for someone born on January 1, 1971?

[an_asker]

[...]
The very specific question posed by an_asker is if someone who had their 50th birthday on Jan 1, 2021 can make catch-up contributions in tax year 2020.
[...]

My question was specifically to ThisTimeItsDifferent. Did you read what he/she had written?

[jsprag]

[...]
The very specific question posed by an_asker is if someone who had their 50th birthday on Jan 1, 2021 can make catch-up contributions in tax year 2020.
[...]

My question was specifically to ThisTimeItsDifferent. Did you read what he/she had written?

Yes, but then I got sloppy.

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

I lazily equated you asking ThisTimeItsDifferent to clarify their statements about the rule with you actually asking about the rule. Earlier post edited.

[an_asker]

[...]
The very specific question posed by an_asker is if someone who had their 50th birthday on Jan 1, 2021 can make catch-up contributions in tax year 2020.
[...]

My question was specifically to ThisTimeItsDifferent. Did you read what he/she had written?

Yes, but then I got sloppy.

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

I lazily equated you asking ThisTimeItsDifferent to clarify their statements about the rule with you actually asking about the rule. Earlier post edited.

No worries. I was really wondering if I missed the rule. Doesn't matter to me or anyone in my circle that I am aware of (as being born on 1/1) anyway!

[retire2022]

The very specific question posed by an_asker is if suggestion by ThisTimeItsDifferent is that someone who had their 50th birthday on Jan 1, 2021 can make catch-up contributions in tax year 2020.

Are you saying that in general the Vanguard app recognizes when someone turns 50 and reflects the higher limit, or that the Vanguard app explicitly reflects a $7,000 limit in 2020 contributions for someone born on January 1, 1971?

Since I am over 50 on Jan 1, 2021 specifically 60, the Roth Catch up and the annual amount was aggregate of $7000 on the Vanguard app.

Since I take this question posed by ThisTimeItsDifferent who born on Jan 1, 1971 the simple answer is to check the Vanguard app to see if the option is available.

I vaguely recall the year I turned 50, the catch up was available to me.

[sergeant]

My plan (and DW's) allowed double catchup contributions in our 457b accounts. Check on your plan, you might be able to sock away even more.

The 457b double catch-up provision only applies to the three years prior to "normal retirement age" (NRA) Does your plan set a specific NRA or allow the participant to set their own NRA?

Both of our plans allow retirement at 50. Retiring at 50 isn't smart cause ours, and most, pensions are back loaded. Since 50 is a NRA we maxed from age 47 to 50. From age 50 to 53 I used the regular catch up. DW used regular catch up from age 50 to 55.

[MadHungarian]

It was aggravating in a way, when i hit it. I'd just managed to FINALLY max out the 401k, after a few years of slowly increasing the contributions, giving it half of each annual COLA, and then what do you know, they go and hit me with this, and now i need to come up with ANOTHER $5000! But another three years of gradual increments and i managed to hit the new limit. $1000/paycheck is a little tough, but i suppose it's all for the good.
I'm still working on trying to reach the Roth IRA limit though. Haven't been quite successful there, yet.

Of course i could've maxed out everything already, but then there's the hobbies to be paid for too. After all, a man's got to live, doesn't he?

[ThisTimeItsDifferent]

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

You must have had your 50th or higher birthday within the taxable year to be “catch-up eligible”.

Reference: Treas. Reg. 1.414(v)-1(g)(3)

Wow. Thanks for the link. I did not know the IRS and SSA treat birthdays differently, or rather eligibility based on birthday vs. based on the day one attains a specified age. I learned something new.

https://secure.ssa.gov/apps10/poms.nsf/lnx/0425015005

B. Age attainment defined

An individual attains a particular age the day before his or her birthday.

https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615015

Social Security follows English common law that finds that a person attains an age on the day before the birthday.

https://secure.ssa.gov/apps10/poms.nsf/lnx/0200302400

GN 00302.400 Point at Which a Particular Age is Attained
A. Rule

An individual attains a particular age on the first moment of the day preceding the anniversary of his/her birth. This rule is based on established legal principles.
B. Example

A person born on 1/1/19 attains age 65 on 12/31/83.

[jsprag]

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

You must have had your 50th or higher birthday within the taxable year to be “catch-up eligible”.

Reference: Treas. Reg. 1.414(v)-1(g)(3)

Wow. Thanks for the link. I did not know the IRS and SSA treat birthdays differently, or rather eligibility based on birthday vs. based on the day one attains a specified age. I learned something new.

I likewise had no idea the SSA (or the English) calculated based on day prior to birthday. Thanks for sharing the links.

[LeslieSmiley]

You turn 50 on the day before your birthday, which matters for people born January 1, I think. Anyway, yes you can start the catch up in January of the year you turn 50.

Wait, what?!! Are you saying that if your birthday is 1/1/1971, you could have started your catch-up last year?

You must have had your 50th or higher birthday within the taxable year to be “catch-up eligible”.

Reference: Treas. Reg. 1.414(v)-1(g)(3)

Wow. Thanks for the link. I did not know the IRS and SSA treat birthdays differently, or rather eligibility based on birthday vs. based on the day one attains a specified age. I learned something new.

I likewise had no idea the SSA (or the English) calculated based on day prior to birthday. Thanks for sharing the links.

the irs seems to use "the calendar year that you turn age xx" method on some of their rules (e.g. age 55 rule with respect to 401k withdrawal), and please correct me if i am wrong, that means you are eligible as of jan 1 even if your birthday is on dec 31.

[ThisTimeItsDifferent]

Looking at the Cornell CFR and IRS sites, I see several pages where the examples and the text are sloppy, referring both to "attaining" an age (which is the day before the birthday in common law) and to one's "birthday" so it is very unclear to me. Do you have a link to the CFR or law pages that refer to the age 55 withdrawal rules?
https://www.tctimes.com/columnists/ask_ ... f887a.html

https://www.irs.gov/retirement-plans/pl ... tion-rules

distributions of elective deferrals cannot be made until one of the following occurs:

You die, become disabled, or otherwise have a severance from employment.
The plan terminates and no successor defined contribution plan is established or maintained by the employer.
You reach age 59½

The required beginning date is April 1 of the first year after the later of the following years:

Calendar year in which you reach age 72 (70 ½ if you reach age 70 ½ before January 1, 2020)

Exceptions. The 10% tax will not apply if distributions before age 59 ½ are made in any of the following circumstances:
Made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55,

[DA200]

Ages: 54/53
$26K to her 401k
$11K to her 401k profit sharing
$7K to her Roth IRA (in years we can stay below MAGI limit - has large SEP-IRA)
$26K to his 403b
$26K to his 457b
$7K to his back door Roth IRA
Total = $103K

[goodenyou]

2021

Ages 55/53

His: $64.5k pre-tax. Own my business (employer and employee)

Hers: $64.5k. $26k pretax. $19k company match pretax and $19.5k after tax converted to Roth in 401k. MegaCorp

Total =$129k

No Backdoor Roth IRA. Too many tIRAs and don’t want to screw up 8606 Forms.

All the rest is taxable savings.

The catch up benefit is like Social Security. It’s nice to reach the milestone to qualify, but you are older.