Q. I know there are catch-up contributions for retirement plans. I’ve heard there’s also something called a “lifetime catch-up” contribution. How does that work?
— Saver

A. Catch-up contributions were added to the tax code by Congress in response to a fear that baby boomers were not saving enough for retirement.

They allow taxpayers turning 50 in a calendar year to make an additional contribution for that year — and subsequent years — to certain retirement plans, said Cynthia Fusillo, a certified public accountant with Lassus Wherley in New Providence.

“The plans that potentially offer these catch-up contributions are 401(k), 403(b), 457 plans — all of which we will refer to as employer-sponsored plans — as well as IRAs,” Fusillo said. “Currently the catch-up amount is up to $6,000 annually for the employer-sponsored plans and up to $1,000 annually for IRAs.”

Fusillo said that employer plans are not required to permit catch-up contributions, although statistics show that over 90 percent of them do.

Check with your benefits department to see if your plan allows catch-ups or not.

Now, lifetime catch-up contributions, which are also called 15-year catch-up deferrals or the special 403(b) catch-up deferral.

These are available for some 403(b) plans, Fusillo said.

This contributions allow employees with 15 years or more of service, but who are not yet age 50, to contribute an additional amount annually.

“This will apply if the employee’s average, annual contribution was less than $5,000,” Fusillo said. “You can then contribute an additional $3,000 annually for a lifetime maximum of $15,000.”

Once you turn 50, the regular catch-up contribution rules apply, she said.

You can learn more from your benefits department, tax advisors and in IRS Publication 571.

Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter.

Sign up for the NJ1015.com Newsletter

Get the best of NJ1015.com delivered to your inbox every day.