Dear Liz: I turned 50 last year but did not make the catch-up contributions I was eligible to make to my government Thrift Savings Plan. This mistake cost me approximately $5,000 in additional taxes in 2014.
To make matters worse, my wife also did not make catch-up contributions in 2014 or for the previous four years for which she was eligible to do so. Can we retroactively make catch-up contributions for the last three tax years and file amended tax returns so we can get additional tax refunds?
Answer: It’s highly unlikely you cost yourself $5,000 in additional taxes, since the catch-up contribution for people 50 and older in 2014 was only $5,500. Your federal tax rate would have been limited to your tax bracket, which is likely somewhere between 15% and 28%. You could have cost yourself $5,000 if you didn’t make any contribution to the plan, since last year’s limit was $17,500 or a total of $23,000 with the catch-up.
The short answer to your question about whether you can catch up with catch-ups is no.
Contributions to workplace retirement plans typically have to be made before the end of the plan year. IRAs, meanwhile, allow contributions until the due date for filing your returns, so that contributions for 2014 could be made until April 15, 2015, and contributions for 2015 could be made until April 15, 2016.
Presumably you’re now signed up to contribute the maximum to each plan.
If you have extra cash to invest, both you and your wife could open IRAs even though you’re covered by workplace plans. If your modified adjusted gross income (MAGI) as a married couple is $96,000 or less, you can deduct the full contributions of $6,500 ($5,500 plus a $1,000 catch-up) each. You can get a partial deduction if your MAGI is between $96,000 and $116,000.
If you can’t deduct your contribution, consider putting the money in Roth IRAs if you can. Roths don’t allow upfront deductions — but the money is tax free when withdrawn in retirement. You and your wife could contribute $6,500 each to a Roth if your MAGI is under $181,000.