<2> Should Higher Earners Still Make 401(k) Catch-up Contributions?
<3> Understanding the Benefits of Catch-up Contributions
If you’re 50 or older, you’re eligible to make catch-up contributions to your 401(k) or other employer-sponsored retirement plans. These contributions allow you to save an additional $6,500 in 2023, bringing your total contribution limit to $27,000. However, the question remains: should higher earners still make 401(k) catch-up contributions?
Benefits of Catch-up Contributions for Higher Earners
While higher earners may have a larger income, they may also have a higher tax bracket, which could impact the effectiveness of their catch-up contributions. However, there are still several benefits to making catch-up contributions, even for higher earners:
<4> < href='https://bloomberg.com' target='_blank'>Tax benefits: Catch-up contributions can help reduce your taxable income, which can lead to lower taxes owed. This can be especially beneficial for higher earners who are in a higher tax bracket.
<5> < href='https://reuters.com' target='_blank'>Compound interest: Catch-up contributions can help your retirement savings grow faster, thanks to the power of compound