If you're age 50 or older, you could boost your retirement savings by contributing more than the standard limit to plans such as 401(k)s and IRAs, but you're probably not.
For example, the 401(k) contribution limit in 2006, for participants younger than age 50, is $15,000. Participants age 50 or older may contribute an additional $5,000 for a total of $20,000 in 2006.
But research indicates that few people are taking advantage of the opportunity.
A study of 2,000 401(k) plans, administered by mutual fund giant Vanguard, shows that only 13 percent of the eligible participants made catch-up contributions in 2004. A study by the Washington, D.C.-based Investment Company Institute, or ICI, focused on IRAs: While about 41 percent of American households own IRAs, just 6 percent made catch-up contributions in tax-year 2004, according to the report.
It's easy to see why a lot of people don't maximize retirement funds: It's hard to come up with the extra cash. Most of the eligible participants are already contributing a portion of their paychecks and trying to set aside another $1,000 or more can stretch a budget too far.
Source: www.BankRate.com
But research indicates that few people are taking advantage of the opportunity.