2025 Retirement Contribution Limits & Considerations for Employers

 

If you run a small business, knowing the retirement contribution limits isn’t just about following the rules—it’s a smart way to save on taxes and plan for the future. Whether you're setting money aside for yourself or helping employees build security, understanding these limits helps you avoid penalties and make the most of every dollar you can save.

Let’s break down the 2025 limits for 401(k)s, IRAs, and catch-up contributions. We'll keep it simple and show what it means for you.

2025 Retirement Contribution Limits

Every type of retirement account has its own rules. According to the Internal Revenue Service, here's what you can put in for 2025:

  • Traditional & Roth IRAs: $7,000

  • SEP IRAs: Up to 25% of pay, or $70,000 max

  • 401(k), 403(b), 457 Plans: $23,500

  • SIMPLE IRA Plans: $16,500

Note that while the total 401(k) limit (including both employee and employer contributions) is $70,000, employees can't contribute more than what they earn from the employer sponsoring their plan.

What About Employees with More Than One 401(k)?

That $23,500 401(k) contribution limit applies across all of an employee’s jobs. So if they have a 401(k) at two companies, they can’t double up. Their combined contributions can’t go over $23,500 unless they’re 50 or older (more on that below).

What If an Employee Also Has an IRA?

Good news—they can still contribute the full amount to both a 401(k) and an IRA in the same year. IRA limits are separate from 401(k) limits.

If you’re self-employed, don’t forget about the SEP IRA. It’s a great way to put away more if you’re running your own shop. Read more here.

What Are Catch-Up Contributions?

Turning 50 has perks. One of them is the ability to put more into your retirement account. If you’re 50 or older by December 31, 2025, you can make catch-up contributions:

  • IRA (Traditional or Roth): $7,500

  • 401(k), 403(b), 457 Plans: $31,000

  • SIMPLE IRA: $19,000

  • SEP IRA: Still capped at $70,000

New for 2025: If you're between 60 and 63, you may be able to put in even more thanks to the “super” catch-up contribution—up to $11,250 extra.

Why Add Catch-Up Contributions?

If you’re in your peak earning years or got a late start on retirement, catch-up contributions help you close the gap. Benefits include:

  • More saved before retirement

  • Tax savings now, if using pre-tax contributions

  • Stronger growth through compounding

  • Peace of mind for the future

 

Should You Make Catch-Up Contributions?

It’s not for everyone. Ask yourself:

  • Can your budget handle it?

  • Are your investments set up to match your goals?

  • Are you keeping your risk spread out (not all in one stock or fund)?

  • Do you have a plan, or could a financial pro help?

Also, don’t go over any of these retirement contribution limits—doing so can cost you a 10% penalty and extra taxes.

Heads-Up for High Earners (Starting in 2026)

If you earn more than $145,000 in 2025, your catch-up contributions must go into a Roth 401(k) starting in 2026. That means you'll pay taxes now, but your withdrawals in retirement will be tax-free.

If you earn less than $145,000, you can still choose the traditional (pre-tax) 401(k).

Employers: If you manage a team, make sure employees understand this change. It affects their paychecks and their long-term savings.

Bottom Line

Retirement contribution limits may seem like just numbers, but they shape your future. Whether you're working solo or running a crew, knowing the limits—and using them—can help you save on taxes, avoid penalties, and build a secure retirement.

For additional guidance, book a no-obligation consultation with JLS Accounting. We’ll help bring you peace of mind where taxes and bookkeeping are concerned.

 
Employee Benefits, Personal Finance, Business Best PracticesJaime Lynn Soares