What to know about retirement contributions

Building a secure retirement starts with consistent contributions to your retirement plan. Whether you're early in your career or approaching retirement age, knowing how contributions function can help you maximize your long-term savings. In this guide, we’ll explore what contributions are, how they benefit your retirement strategy, and the various types you might be eligible to make.

What are contributions?

Contributions are the funds you regularly set aside in your retirement account to help build your retirement savings. You decide how your contributions are invested by making selections from the options available in your plan. As you continue to contribute, you build your retirement savings gradually over time. When your investments earn money, those earnings are reinvested in your account to help you earn even more. This process is called compounding, and it’s a powerful way to grow your savings over the long term.

How do contributions work?

You decide how much to set aside from each paycheck to go into your retirement account. Depending on your plan, you can choose a fixed dollar amount or a percentage of your pay. You’re free to adjust your contribution amount whenever needed. If your plan offers it, money can be automatically taken from your paycheck and invested based on the selections you’ve made. Each year, the IRS sets a limit on how much you’re allowed to contribute, which helps guide your savings strategy.

How much should you contribute?

The amount you’ll need for retirement depends on several factors, like your target retirement age and the lifestyle you want to maintain. A planning tool such as My Retirement Goals tool can help you estimate how much you might need in retirement based on your personal situation. It also allows you to monitor your progress and make adjustments along the way.

No matter how much you can contribute right now, the most important step is to begin. Time plays a major role in how your savings grow. Thanks to compounding, even small contributions can add up significantly over the years. Starting early gives your money more time to work for you, and you can always increase your contributions later.

What types of contributions can you make?

There are different ways to contribute to your retirement account, and your plan may offer one or more of the following options. To understand what’s available and whether you’re eligible, check your plan details or speak with a financial professional.

• Pre-tax contributions
  This traditional option allows you to contribute money before taxes are taken out. It lowers your taxable income now, and you’ll pay taxes later when you withdraw the money during retirement.
  
  
• Roth contributions
  With Roth contributions, you pay taxes on the money before it goes into your account. If certain conditions are met, your withdrawals in retirement will be tax-free. This option may be a good fit if you expect to be in a higher tax bracket later or exceed income limits for contributing to a Roth IRA. Not all plans include Roth options, so be sure to review your plan to see what’s offered.
  
  
• Matching contributions
  Some employers contribute additional money to your account by matching a portion of what you save. These matches can help your savings grow faster. To make the most of this benefit, try to contribute at least enough to receive the full match.
  
  
• Catch-up contributions
  If you’re age 50 or older, you may be able to contribute more than the standard IRS limit. These extra contributions can help boost your savings as you get closer to retirement. There are different types of catch-up contributions, and some may apply based on your income level or plan type. Review your plan or speak with a financial professional to see what options are available to you.

  Here are key catch-up contributions to be aware of:

  • Age 50+
    Once you turn 50, you can contribute beyond the standard annual limit set by the IRS. These additional contributions are designed to help you increase your savings during your final working years.
    
    
  • Ages 60–63
    If you reach age 60 through 63 by the end of the calendar year, you may qualify to contribute even more than the age 50 catch-up limit. During this window, the IRS allows up to 150% of the standard catch-up amount, giving you a chance to significantly boost your retirement savings. If you turn 64 during the year, you’ll return to the regular catch-up limit available to those age 50 and older.
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Note for high earners: Starting in 2026, if you’re a high earner as defined by the IRS, your catch-up contributions must be made as Roth contributions. You fall into this category if you earned more than $145,000 in wages subject to Social Security taxes (FICA)¹ with a single employer in the previous year. If you meet these requirements and your plan doesn’t offer a Roth option, you won’t be able to make catch-up contributions beginning in 2026. If you meet these requirements and your plan offers a Roth option, you'll continue being able to make catch-up contributions. In either case, you should review your current deferral elections, watch for future communications from HR or your plan provider and be prepared to make updates in your account by the end of 2025.