There's a New SECURE Act 2.0 Super Catch-Up Contribution Available to Some Retirees. Here's How It Could Help You Prepare for Retirement.

If you're between the ages of 60 and 63 by the end of the year, you're part of a rarefied (but lucky) group. Beginning this year, Section 603 of the SECURE Act 2.0 allows you to supercharge your retirement accounts by contributing even more -- but only if you're between 60 and 63. Once you hit age 64, the party is over, and you're back to making "regular" catch-up contributions.

Here's how the optional catch-up opportunity works.

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Super catch-up

A super catch-up does not replace an ordinary catch-up. The opportunity to make super catch-ups may be new, but regular catch-up amounts have been around since 2001. As part of the Economic Growth and Tax Relief Reconciliation Act, Congress allowed people aged 50 and older to contribute more to their accounts, helping them reach their retirement savings goals.

These catch-up contributions were initially designed to circumvent established legal limits and limits imposed by individual retirement plans. For workers 50 and older, catch-up contributions have been helpful. After all, contributing an extra $7,500 (the maximum catch-up contribution to a 401(k), 403(b), and 457(b) plan can turbo-boost a retirement account.

Let's say someone doesn't start investing in a retirement plan until age 50. At that point, they peg out their 401(k) plan by contributing the full $23,500. With an average annual return of 7%, they have $590,432 in the account by the time they're 65. However, if they took advantage of the super catch-up between ages 60 and 63, they would have $693,381 by the end of their 65th year, over $100,000 more.

While the new super catch-up only applies to those aged 60, 61, 62, or 63, it is impressive. The following table offers a peek into how much more a person can invest for retirement during those crucial years.

Data source: IRS.

A detail worth noting

Although the table shows both workplace retirement plans and SIMPLE IRAs, certain employees may not be able to make catch-up opportunities even if they're 50 or older. Typically, it's up to the employer and/or plan regulations to determine whether catch-up contributions are permitted. If a retirement plan doesn't allow for standard catch-ups, the new super catch-up will also not be available. Your best bet is to check with your plan administrator to ensure the plan you're enrolled in does allow for catch-ups.

Given the state of the U.S. economy, it's natural to wonder how your retirement savings will stack up. The best anyone can do at this point is to stay the course and, if possible, add every dollar to the accounts designed to support you in old age.

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