Here’s a way to add $130,000 to your retirement savings-By Bill Bischoff

You can make a lot of money with retirement account catch-up contributions

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If you are age 50 or older, you can make extra “catch-up” contributions to certain types of tax-favored retirement accounts. There’s still time to make an extra catch-up contribution to your IRA for the 2015 tax year. The deadline is April 18.

Many people fail to capitalize on this opportunity because they don’t realize that making these extra contributions can make a significant difference in their retirement-age wealth. Here’s the proof.
Catch-up contribution basics
Once you’ve reached age 50, you can make catch-up contributions to your traditional IRA or Roth IRA. And if you were 50 or older as of Dec. 31, 2015, you can still make a catch-up contribution for the 2015 tax year. You have until April 18, 2016 to get it done.
Contributions to deductible IRAs create tax savings, but your income may be too high to qualify. Contributions to Roth IRAs don’t generate any up-front tax savings, but you can take tax-free withdrawals after age 59 1/2 (assuming you’ve had at least one Roth account open for over five years). There are income restrictions on Roth contributions, too. Worst case, you can make extra nondeductible traditional IRA contributions and benefit from the account’s tax-deferred earnings advantage.
Check out the MarketWatch Tax page
Assuming your company retirement plan allows them, you can also make extra salary-reduction contributions of up to $6,000 to your 401(k), 403(b), or 457 account starting with the year you turn age 50. Salary-reduction contributions are subtracted from your taxable wages, so you effectively get a federal income tax deduction for making them. If your state has a personal income tax, you’ll generally get a state tax deduction, too. You can use the resulting tax savings to help pay for part of your catch-up contribution, or you can set them aside in a taxable retirement savings account to further increase your retirement-age wealth. Either way, it’s all good. While it is too late to make a catch-up contribution to your company plan for the 2015 tax year, it’s not too early to make one for this year.
Maximum catch-up contributions are:
• Traditional and Roth IRAs: $1,000
• 401(k), 401(b) and 457 plans: $6,000
How much extra could you accumulate?
Quite a bit, because maximum catch-up contributions are considerably larger than when they were first introduced. For example, in 2002 the maximum catch-up contribution to a 401(k) account was only $1,000 versus $6,000 now. The maximum catch-up contribution to a traditional or Roth IRA was only $500 versus $1,000 now. Let me give you some numbers to help quantify how much extra retirement-age wealth you could pile up by making catch-up contributions.
IRA catch-up contributions
Say you’re now age 50 and you contribute an extra $1,000 to your IRA this year and then do the same for the next 15 years, through age 65. Here’s how much extra you could accumulate in your IRA by age 65 (rounded to the nearest $1,000).
4% annual return: $22,000
6% annual return: $26,000
8% annual return: $30,000
Remember: Making larger deductible contributions to a traditional IRA can also lower your tax bills. Making additional contributions to a Roth IRA won’t, but you can take more tax-free withdrawals later in life.
Company plan catch-up contributions
Once again, say you’re age 50. You contribute an extra $6,000 to your company plan for this year. Then you do the same for the following 15 years, through age 65. Here’s how much extra you could accumulate by age 65 in your 401(k), 403(b), or 457 plan (rounded to the nearest $1,000).
4% annual return: $131,000
6% annual return: $154,000
8% annual return: $182,000
Remember: Making larger contributions can also lower your tax bills. It’s all good!
Making both IRA and company plan catch-up contributions
Finally, let’s say you are age 50 and you contribute an extra $1,000 to your IRA for this year plus you also make an extra $6,000 salary-reduction catch-up contribution to your company plan. Then you do the same for the next 15 years, through age 65. Here’s how much extra you could accumulate by age 65 in the two accounts together (rounded to the nearest $1,000).
4% annual return: $153,000
6% annual return: $180,000
8% annual return: $212,000
The bottom line
As you can see, making these extra catch-up contributions can potentially add up to some pretty big numbers by the time you reach retirement age. If your spouse is able to make catch-up contributions too, you can double all the amounts shown here. That is certainly something to think about, especially if you have doubts about whether Social Security will be there for you when you need it.

Culled from MarketWatch