Maximizing Retirement Contributions in 2025: New Limits and Opportunities for Small Business Owners
- Cherie Sayban
- Apr 22
- 4 min read
As a small business owner or self-employed professional, you wear many hats — but one of the most important roles you play is that of your own financial planner. While building and growing your business is top priority, securing your future through smart retirement planning is just as crucial.
The IRS has rolled out new retirement contribution limits for 2025, offering fresh opportunities to boost your savings and reduce your tax burden. In this guide, we’ll break down the updated numbers, explore the best retirement plans for small business owners, and share strategies to maximize your contributions and long-term financial security.
🚨 2025 Retirement Plan Contribution Limits: What’s New?
Each year, the IRS adjusts retirement plan contribution limits for inflation. Here are the key updates for 2025:
1. 401(k), Solo 401(k), and Roth 401(k)
Employee contribution limit: $23,500 (up from $22,500 in 2024)
Catch-up contribution (age 50+): $7,500
Total contribution limit (employee + employer): $69,000 (or $76,500 with catch-up)
2. SEP IRA
Contribution limit: Up to 25% of compensation or $69,000, whichever is less than $70,000.
3. SIMPLE IRA
Employee contribution limit: $16,500 (up from $16,000 in 2024)
Catch-up contribution (age 50+): $3,500
Employer match: Usually up to 3% of employee compensation
4. Traditional and Roth IRAs
Contribution limit: $7,000 (unchanged)
Catch-up contribution (age 50+): $1,000
Income phase-outs apply for Roth IRAs (based on modified adjusted gross income)
🛠️ Top Retirement Plans for Small Business Owners
Let’s look at the most relevant options and how to use them effectively:
1. Solo 401(k): The Powerhouse Plan
Ideal for: Self-employed individuals with no full-time employees (other than spouse)
Allows both employee and employer contributions
Option to go Roth or Traditional
Ability to make catch-up contributions if over 50
Offers loan provisions if needed
Strategy Tip: Max out your employee contribution early in the year, then add employer contributions as your income becomes clearer. Use a Roth Solo 401(k) if you expect to be in a higher tax bracket in retirement.
2. SEP IRA: Simple and Flexible
Ideal for: Solopreneurs and businesses with a few employees
Contributions are employer-only
Easy to set up and low cost
No catch-up contributions
Strategy Tip: Use a SEP IRA if you want flexibility in contribution amounts — great for businesses with variable income year to year.
3. SIMPLE IRA: Low-Admin Option for Teams
Ideal for: Small businesses with up to 100 employees
Easy to manage, lower startup and maintenance cost
Requires mandatory employer contributions (either match or fixed)
Strategy Tip: If you want to offer a retirement plan to employees without complex compliance, this is a good entry-level option. Make sure to educate employees on their options and benefits.
💡 Maximizing Retirement Savings in 2025: Pro Tips
Whether you're a solo entrepreneur or managing a small team, these strategies will help you get the most out of your retirement plan:
✅ 1. Contribute Early and Often
Take advantage of compounding interest. The earlier you contribute in the year, the more time your money has to grow.
✅ 2. Automate Contributions
Set up recurring transfers to your retirement account — it takes the guesswork out of saving and keeps you consistent.
✅ 3. Don’t Forget Catch-Up Contributions
If you’re 50 or older, use catch-up contributions to give your savings a final boost before retirement.
✅ 4. Consider a Roth Option
Roth contributions are made with after-tax dollars, but withdrawals in retirement are tax-free. Great if you expect taxes to rise or your income to increase.
✅ 5. Work With a Financial Advisor or Tax Pro
Choosing the right plan and maximizing contributions often requires strategic tax planning. A professional can help you optimize deductions, minimize taxes, and ensure compliance.
🔄 Mix and Match: Combining Plans
Did you know you can combine plans to supercharge your savings? For example:
Solo 401(k) + Roth IRA: Max out both for tax diversification
S-Corp owners can use payroll to justify employee contributions to a Solo 401(k) while making employer contributions as a percentage of wages
🧮 Example: Solo 401(k) Contribution for a Self-Employed Consultant
Let’s say you’re a 45-year-old consultant with net self-employment income of $120,000.
You can contribute:
Employee deferral: $23,000
Employer contribution (20% of net SE income): ~$24,000
Total: ~$47,000 in 2025 — all tax-deferred!
If you're 50 or older, add another $7,500 in catch-up for a total of $54,500.
📈 Final Thoughts: Your Future Is Worth Investing In
Retirement might feel like a distant goal, especially when you're knee-deep in the daily grind of running a business. But by maximizing your contributions in 2025, you're doing your future self a massive favor — and possibly trimming this year’s tax bill in the process.
Take the time to evaluate your options, set up a plan (or revisit your current one), and make 2025 the year you take control of your retirement savings like a boss.
Need help picking the right retirement plan for your business? Drop a comment below or connect with a financial planner who specializes in small businesses and self-employed professionals.
Here’s to growing your business and your future wealth!
About the Author
Cherie Sayban is a certified public accountant. She has over 25+ years of experience in Finance, Accounting and Bookkeeping.
Cherie Sayban CPA provides various financial and accounting solutions to small and mid-size businesses. Our portfolio includes: tax preparation, payroll preparation, accounts receivable and payables, general ledger, and QuickBooks . Our bookkeeping workshops are offered both in-person and virtually.
To learn more about how Cherie Sayban CPA can help you and your business, click HERE
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