IRA contributions: Should you catch up if you were never behind?

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At a glance

  • Catch-up contributions can help investors make up for lost time or maximize their savings as retirement approaches.
  • In 2021, the IRA contribution limit for investors age 50 and older is $7,000.
  • Just because you can make a catch-up contribution doesn’t mean you should—it depends on your unique situation.

Picture yourself in high school or college. You’ve studied thoroughly for a test and feel prepared. So when your friends ask you to join their study group, do you do it?

Let’s get back to present day. The situation is similar, but the details differ: You’ve been saving for retirement and feel confident about the progress you’re making toward your goals. So when you’re faced with the opportunity to make a catch-up contribution, do you do it?

The catch-up question

Catch-up contributions are intended to help investors age 50 and older make up for missed investment opportunities during their working years. IRAs, employer-sponsored plans, SIMPLE IRAs, SIMPLE 401(k) plans, and even Health Savings Accounts (HSAs)* offer catch-up contributions, and you can make catch-up contributions to multiple retirement plans.

Most investors can benefit from maximizing their savings as retirement approaches. For example, if your IRA earns a 6% average annual return and you make an annual catch-up contribution of $1,000 starting the year you turn 50, these catch-ups could generate over $11,000 in investment earnings by the time you reach age 65—giving you an extra $27,000 of retirement income.**

In spite of this compelling hypothetical example, real life isn’t hypothetical. And you’re not “most investors.” Your situation is unique, and it’s important to understand your options before committing additional cash to a tax-advantaged account.

4 facts about IRA investing

  1. In tax year 2021, you can make a $1,000 catch-up contribution—on top of the standard $6,000 contribution limit—to an IRA if you’re age 50 or older. This means you can contribute a maximum of $7,000.
  2. You can’t contribute more than you earn in any given year, but if you’re married and have no income, you may be able to open a spousal IRA to save for retirement.
  3. The IRA contribution limit dictates how much each investor can save for retirement each year. You can divide your contribution among 2 or more IRAs—Roth, traditional, or a combination of both—but your total contribution amount can’t exceed the limit.
  4. Consider your modified adjusted gross income (MAGI) before making a Roth IRA contribution. Your income may disqualify you from contributing the maximum amount, or from contributing to a Roth IRA directly.

Consider catching up

If one or more of these statements describe your current situation, consider making a catch-up contribution in 2021.

  • You need to make up for missed investment opportunities during your working years.
  • Your income is high, and you want to lower your tax liability for the year through an IRA deduction.
  • Your income is lower now than you expect it to be in the near future. In this case, consider contributing to a Roth IRA, which will provide you with tax-exempt income in the future when your tax rate is higher.
  • Making a catch-up contribution fits into your budget and will help you reach (or exceed) your retirement savings goal.

Consider holding off

Making a catch-up contribution in 2021 may not be necessary (or in your best interest) if one or more of these statements describe your current situation.

Make sure you’re on track for retirement

  • You’re currently taking withdrawals from a retirement account (or you’re ready to start).
  • You anticipate needing the $1,000 catch-up contribution to cover other expenses in the next year.
  • You’ve consistently saved for retirement, and you feel confident in your ability to reach (or exceed) your retirement savings goal.
  • You have other savings goals, such as saving for a loved one’s education, taking a vacation, or buying a home.

It’s not all or nothing

For better or worse, you get to answer the catch-up contribution question every year from the time you’re 50 until you stop working. Making (or skipping) an IRA catch-up contribution in any given year won’t make or break your retirement dream; catch-ups are simply an opportunity to save more as retirement approaches.

If you’re on the fence about what to do, consider making a partial catch-up contribution, or make a catch-up contribution in just your IRA (but not any other retirement accounts). You can also partner with an advisor who can give you a recommendation about catch-up contributions as part of your complete retirement plan.

Partner with an advisor to get a plan that will see you through retirement.

*HSA catch-up contributions can be made starting at age 55

**This hypothetical example does not represent the return on any particular investment and the rate is not guaranteed. The final account balance does not reflect any taxes or penalties that may be due upon distribution. 


All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

When taking withdrawals from an IRA or employer plan account before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

Advice services are provided by Vanguard Advisers Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally-chartered limited-purpose trust company.

We recommend that you consult a tax or financial advisor about your individual situation. 

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