You should take advantage of all tax-advantaged ways to save for retirement. In addition to normal contributions, individuals age 50 and older can make catch-up contributions to individual retirement accounts (IRAs) and 401(k) plans. In 2008, the maximum contribution to a 401(k) is $15,000 plus an additional $5,000 catch-up contribution for individuals age 50 and older, if permitted by the plan. For IRAs, the maximum contribution in 2008 is $5,000 plus an additional $1,000 for individuals age 50 and over.
If your 401(k) plan limits your contribution to less than the maximum amount of $15,000, you can make catch-up contributions, if permitted by the plan, once you reach the plan's maximum contribution.
Thus, once you reach age 50, make sure to take advantage of catch-up contributions. Please call if you'd like to discuss the potential impact of these additional contributions on your retirement portfolio.