How catch-up contributions can bolster your retirement savings

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In recent years, saving for retirement has become a lot more challenging. It's further complicated by longer life spans, which mean retirees must make their savings last over a greater duration. Not surprisingly, the Employee Benefits Research Institute found in its 2016 Retirement Confidence Survey that only 21% of workers felt "very confident" about having enough money for retirement.
However, there is good news for those ages 50 years or older. If you think that you will need more money to live in retirement than you currently have and you have been wondering what else you can do to help build your retirement assets, there is a simple tax-law provision that you may not be aware of: IRA catch-up contributions.
If you are eligible, the federal government allows individuals ages 50 years or older to contribute an additional amount to their IRA(s) each year beyond the maximum contribution limit. These amounts are commonly referred to as catch-up contributions. The catch-up amount for 2017 is $1,000, which means you can contribute up to $6,500 if you are in the target age group. "Leveraging the catch-up contribution is a great opportunity for those nearing retirement to potentially repair their balance sheets and enable them to have a better chance of reaching their long-term planning goals," says Debra Greenberg, director, IRA Product Management, Merrill Lynch. You can begin to add to those savings today.
If you are eligible to contribute to an IRA and you were late in starting to save for retirement, or if your retirement account value has declined due to economic conditions, you can also take advantage of this opportunity to contribute to your savings now and potentially provide yourself with additional retirement income when you are no longer working.
Traditional IRA and Roth IRA contribution limits and catch-up contributions
  2016 2017
Up to age 50* $5,500 $5,500
Catch-up contributions provision if ages 50 and older $1,000 $1,000
Total contributions if ages 50 and older $6,500 $6,500
Who is eligible to contribute?

Anyone under the age of 70½ with earned income equal to or greater than his or her IRA contribution can make a contribution to a Traditional IRA. Whether it will be deductible or not will depend on the amount of earned income and your tax-return filing status. For Roth IRA contributions, modified adjusted gross income limits and filing status criteria apply in determining whether you are eligible to make a contribution. You must be within those limits to contribute to a Roth IRA.

IRA contributions for 2016 can be made through the 2016 tax filing deadline (generally, April 15th). If April 15th falls on a weekend or holiday, the deadline typically is the next business day. The tax filing deadline for 2016 is expected to be April 18, 2017.

*You are treated as being age 50 or older if you turn age 50 or older at any point during the calendar year.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

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