As retirement looms, many Americans, particularly those aged 45-64, find their retirement savings alarmingly low, with median 401(k) balances under $100,000. To address this shortfall, individuals are encouraged to utilize catch-up contributions in retirement accounts such as 401(k)s and IRAs. Specifically, those over 50 can contribute significantly more to these accounts, enabling greater tax savings and potential for growth. Cutting fixed expenses and possibly adjusting retirement timelines might also be necessary for those aiming to bolster their financial readiness before retiring.
For Americans ages 45 to 54, the median 401(k) balance is just $60,763 according to Vanguard's How America Saves Report. This is far less than most people need to be ready to retire.
Accounts like a 401(k) and IRA allow you to reduce your taxable income based on the amount of contributions that you make during the year.
Once you are 50 or over, you become eligible for extra catch-up contributions.
In 2025, the IRS reports that the maximum 401(k) contribution is $23,500 while the maximum contribution for IRA accounts is $7,000.
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