In addition to normal contributions, individuals age 50 and older can make catch-up contributions to individual retirement accounts (IRAs) and 401(k) plans. However, in 2004, only 13% of eligible participants made catch-up contributions to 401(k) plans, while only 6% made catch-up contributions to IRAs (Source: Bankrate, Inc., June 26, 2006).
In 2007, the maximum contribution to a 401(k) plan is $15,500 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 2007 is $4,000 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 $15,500, 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.