What are "catch-up contributions" in a 401(k) plan?

Catch-up contributions are additional contributions that individuals aged 50 and older are permitted to make to their 401(k) plans beyond the standard contribution limits set by the IRS. This provision is designed to help individuals who may not have been able to save enough for retirement in their earlier years the opportunity to increase their retirement savings as they approach retirement age.

This feature recognizes that individuals in this age group often have the financial capability to save more, and it encourages them to boost their retirement funds. The specific catch-up contribution limit is adjusted periodically by the IRS, providing participants with a higher ceiling on their contributions to enhance their retirement security.

Each of the other options does not accurately describe catch-up contributions, as they pertain either to employer contributions for retired employees, limits set by the IRS in a general sense without regard to age, or fund transfers from different accounts, which do not relate to the specific allowance for additional savings by older participants.