This blog is for clients who strive to maximize their retirement plan contributions each year.
Each tax year when I am reviewing clients’ W-2s, I notice that they often fall short of fully funding their SIMPLEs or 401Ks even though their intention was to maximize their contributions.
As a result, they overpay their taxes by hundreds or thousands of dollars.
But if you follow my blogs, you know that the big problem isn’t overpaying taxes currently; the big problem is the loss of tens of thousands of dollars of future wealth and income as a result of not letting that money grow in a tax-deferred account.
For 2025, Congress and the IRS decided to make things interesting. (Or phrased another way, they just couldn’t refrain from adding more complications.)
The amount that can be contributed to a SIMPLE or 401K depends on your age at midnight December 31, 2025.
These are the maximums that can be contributed to a SIMPLE (in a company with fewer than 25 employees):
Under age 50: $17,600
Ages 50-59 and 64+: $21,450
Ages 60-63 $22,850
These are the maximums that can be contributed to a 401K or a solo 401K:
Under age 50: $23,500
Age 50-59 and 64+ $31,000
Age 60-63 $34,750
These numbers are for the employee contributions only. Any employer contributions would be in addition to these numbers. For those of you who strive to maximize your retirement plan contributions, reduce your tax liability, and build wealth and future income, make sure that you are on target to reach the maximum in 2025.