Understanding contributions to your retirement plan

Saving for retirement by making contributions to your retirement plan is one of the most important steps you can take to reach your goals. Whether you’re just starting your career or nearing retirement, understanding how contributions work can help you make the most of your savings. Here’s a look at what contributions are, how they work and different kinds of contributions you may be able to take advantage of.

What are contributions?

Contributions are money you put into your retirement account such as a 457(b), 403(b) or 401(k) plan. You decide how the contributions are invested by making investment selections within your plan. As you continue to contribute, you build your retirement savings a little at a time. In addition, when your investments earn money, those earnings are reinvested in your account to help you earn even more. It’s called compounding, and it’s a powerful way to grow your savings over time.

How do contributions work?

You choose how much to contribute to your account from each paycheck. Depending on your plan, you may be able to select a set dollar amount or a percentage of your pay, and you can change your contributions at any time. The money is deducted from your paycheck¹ and invested in your account based on your investment selections. The IRS sets an annual limit you can contribute based on the type of plan you have.

How much should I contribute?

The amount needed for retirement varies depending on factors like when you hope to retire and the kind of lifestyle you want. Our all-in-one retirement and financial planning tool My Income & Retirement PlannerSM makes it simple to come up with a personal savings target and choose an amount to contribute. You can also use the tool to check your progress and make adjustments to help you stay on track.

No matter how much you can contribute, the most important thing is to get started. Time is a key ingredient in compounding, which can help grow your money exponentially over time. Even if you start small, you can increase your contributions down the road.

What kinds of contributions are there?

There are several types of contributions you can make. Talk with us to find out about the options available in your plan and check your eligibility.

• Pre-tax contributions
  This is the traditional option. Money goes into your retirement account before taxes are taken out, which lowers your taxable income now. You’ll pay taxes later when you withdraw the money in retirement.
  
  
• Roth contributions
  With Roth contributions to a retirement plan, you pay taxes on the money now, but your withdrawals in retirement are tax-free as long as they meet certain requirements. This option may make sense for you if you’re younger with many working years left, expect to be in a higher tax bracket during retirement or exceed income limits for contributing to a Roth IRA. Keep in mind that not all plans offer Roth options. To see if yours does, check your plan for details. If you need help deciding whether this option is a good fit, talk with us or your financial professional.
  
  
• Matching contributions
  Some employers offer to match the contributions you make to your retirement account up to a certain amount. These matches are additional money invested in your account, which can help your money grow faster. To take full advantage, you need to contribute at least up to the amount your employer specifies. Keep in mind matches are more common among certain types of plans such as 401(k) and 403(b) plans. To see if a match is available and learn more, check with your plan administrator.
  
  
• Catch-up contributions
  These contributions allow people ages 50 and over to save additional money for retirement beyond normal IRS limits. There’s more than one kind of catch-up contribution, and you might be eligible for more than one. Here are key catch-up contributions to be aware of. If you’re a high earner, be sure to check the “Note for high earners” below for important information that might apply.
  
  To check current catch-up limits, visit our IRS limits page.
  
  
  • Age 50+: If you’re age 50 or older, you can make extra contributions beyond the regular annual limit. The IRS sets a separate catch-up limit for these additional contributions. This can help you boost your savings as you get closer to retirement.
    
    
  • Ages 60–63: If you reach the ages of 60 through 63 by the end of a calendar year, you can contribute even more than the age 50+ catch-up limit. The limit during these ages is 150% of the standard catch-up amount, giving you a chance to supercharge your savings. Be aware that if you’re turning 64 within a calendar year, you’re only eligible for the 50+ catch-up that year.
    
    
  • 457(b): If you’re within 3 years of your plan’s normal retirement age, you may be eligible to make a one-time election to contribute additional money to your retirement plan. This type of catch-up is also subject to an IRS limit set annually.
    
    
  • 403(b): If you have 15 or more years of service at the same employer and haven’t maxed out your 403(b) contributions in previous years, you can contribute an additional $3,000 a year. This catch-up has a $15,000 lifetime limit.

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)² 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.