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How Do IRA Catch-up Contributions Work?

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Quick Answer

As of the 2015 tax year, individuals at least 50 years old may make a catch-up contribution of no more than $1,000 to an IRA, according to Ameriprise Financial. This amount is in addition to the regular contribution limits for both traditional and Roth IRAs.

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Catch-up contributions are a way for a person nearing retirement to speed up the saving process and ensure he builds a nest egg big enough to support himself. In a traditional IRA, a person can make a catch-up contribution every year from the age of 50 until the year prior to turning 70 1/2, provided he has taxable income of at least $5,500. If taxable income is less than $5,500, then the regular contribution limit is equal to total taxable income, explains the Internal Revenue Service.

The contribution rules for a Roth IRA are slightly different. While catch-up contributions can be made beginning at age 50, a person can continue making contributions after he turns 70. As of 2015, if the person makes less than $116,000 per year, the regular contribution limit is $5,500 (same as a traditional IRA). If a person makes between $116,000 and $131,000, the regular contribution limit can be determined using rules posted on the IRS website. A person making more than $131,000 cannot contribute to a Roth IRA and therefore cannot make catch-up contributions either.

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