Day 4 : Maximizing Retirement Contributions Before the New Year
With less than 100 days left in 2025, it's time to ensure you're maximizing your retirement contributions. These contributions not only secure your future but can provide significant tax benefits today.
2025 Contribution Limits
Traditional and Roth IRAs
Under 50: $7,000
50 and older: $8,000 (includes $1,000 catch-up contribution)
401(k) Plans
Under 50: $23,000
50 and older: $30,500 (includes $7,500 catch-up contribution)
SEP-IRA (for business owners)
Up to 25% of compensation or $69,000, whichever is less
For self-employed: up to 20% of net self-employment income
Solo 401(k) (for self-employed)
Employee contribution: same limits as regular 401(k)
Employer contribution: up to 25% of compensation
Total maximum: $69,000 (under 50) or $76,500 (50+)
Strategic Considerations
Tax Bracket Management If you expect to be in a lower tax bracket in retirement, traditional contributions (tax-deductible now) might make sense. If you expect higher taxes later, consider Roth contributions (tax-free in retirement).
Cash Flow Planning Don't compromise your emergency fund or current financial stability. Only contribute what you can truly afford to lock away until retirement.
Employer Matching If your employer offers matching, ensure you contribute at least enough to receive the full match—it's free money.
Last-Minute Strategies
December Bonus Allocation If you're expecting a year-end bonus, consider allocating it directly to retirement accounts.
Backdoor Roth Conversion High earners who can't contribute directly to a Roth IRA might consider the backdoor Roth strategy.
Spousal IRA Contributions Even if one spouse doesn't work, you might be able to contribute to a spousal IRA based on the working spouse's income.
Business Owner Opportunities
SEP-IRA Setup Can be established and funded as late as the business tax filing deadline (including extensions).
Solo 401(k) Considerations Must be established by December 31st, but contributions can be made until the tax filing deadline.
Taking Action
Calculate your maximum allowable contribution
Determine how much you've already contributed this year
Assess your cash flow to see how much more you can contribute
Contact your plan administrator or financial advisor
Set up automatic contributions for any remaining months
The Power of Compound Interest
Remember, the money you contribute now has decades to grow. Even small increases in contributions can result in significantly more retirement income.
Don't wait until December 31st—start maximizing your contributions today.