Catch Up Contributions

Did you know that you can contribute more to your individual retirement account (IRA) once you turn 50? Many employer plans also allow extra “catch-up” contributions.

Annual IRA contributions generally may not exceed $6,000 (the 2016 inflation-adjusted limit) or your taxable compensation income, if less. But the $6,000 limit increases by $1,000 in the year you turn 50. Contributing the maximum possible amount to your IRA until you retire can give your savings a boost.

Contribution limits are higher in employer plans. Here are the figures for 2016:

• 401(k) or 403(b) plan — $18,000 plus $6,000 catch-up (if available)

• SIMPLE plan — $12,500 plus $3,000 catch-up (if available)

At an assumed average annual return of 6% (actual returns may be different), $1,000 of annual catch-up contributions grow to $23,276 in 15 years, $6,000 of annual contributions grow to $139,656, and $3,000 of annual contributions grow to $69,828.