Have you started planning ahead for retirement? Thinking of retirement and pairing that with tax savings might just give you the best of both worlds. You should understand and make the most of 2025 tax savings retirement plans. It’s the perfect time to learn what is available, especially if you’re a small business owner, contractor, or self-employed professional.
The right retirement strategy doesn’t just help you secure your financial future. Sure, that’s a big part of it. However, many options also allow you to take advantage of meaningful tax benefits when filing your 2025 return. SEP IRAs, Solo 401(k)s, and SIMPLE IRAs remain some of the strongest tools available, each with different contribution limits and deadlines you’ll want to understand before the year is underway.
Below, we break down what each option offers, who they’re best suited for, and what to know about contribution rules for the 2025 tax year.
SEP IRAs: A Flexible Option for Many Business Owners
A Simplified Employee Pension (SEP) IRA is one of the most flexible retirement plans available for business owners, freelancers, and self-employed individuals. It’s known for its high contribution limits, but also because it’s relatively easy to set up and you can fund the plan as late as your tax filing deadline.
Who might want to consider a SEP IRA? Here are a few examples:
Those who:
- Are self-employed or own a small business
- Want a plan with minimal administrative requirements
- Prefer flexibility in deciding how much to contribute each year
- Need the option to remit contributions when filing 2025 taxes rather than during the calendar year
For the 2025 tax year, SEP IRA contributions are generally limited to:
- Up to 25% of your compensation, or
- A maximum annual amount set by the IRS (2025 limits expected to adjust for inflation)
Because SEP IRAs are funded entirely by employer contributions, employees do not contribute personally. If you’re self-employed, you’re considered both employer and employee, so the percentage is based on your net earnings after accounting for self-employment tax adjustments.
One of the biggest advantages of a SEP IRA is its timing flexibility. The deadlines are specific to you. They can be established as late as your tax filing deadline, including extensions. This makes it an ideal option for people who want to calculate their profitability before deciding how much to contribute.
Solo 401(k)s: High Contributions and Strong Flexibility for the Self-Employed
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An Individual 401(k) is designed for business owners with no employees other than a spouse. It provides some of the highest possible contribution limits because you can contribute both as the employee and employer.
Who might these be best for? If you:
- Are self-employed with no staff
- Want the ability to contribute aggressively toward retirement
- Prefer the choice between traditional (pre-tax) and Roth (after-tax) contributions
- Want the option of taking participant loans (not available with SEP or SIMPLE IRAs)
Contributing to a Solo 401(k) happens in two parts so limits are slightly different from other IRA options. Here’s a breakdown.
Employee Contribution
- You can contribute up to the annual IRS elective deferral limit (expected to increase for 2025).
- You can contribute up to 100% of earned income up to the annual limit.
Employer Contribution
- As the employer, you can contribute up to 25% of compensation.
- Combined employer + employee contributions cannot exceed the overall 2025 plan limit.
A Solo 401(k) generally allows for much higher contributions than a SEP IRA if your income supports it. Now, the timing rules are very important here. These must be established before December 31, 2025. However, employer contributions can typically be made up to tax filing deadlines, including extensions.
If you want to maximize 2025 contributions, it’s important to set the plan up early enough to meet these rules.
SIMPLE IRAs: Easy to Administer and Ideal for Small Employers
A SIMPLE IRA is designed for businesses with 100 or fewer employees and offers an easier, lower-cost alternative to a traditional 401(k). It’s especially appealing for small employers who want to offer a retirement plan without the complex administration.
A SIMPLE IRA is a strong option if you:
- Have employees and want to offer a retirement plan
- Prefer straightforward annual administration
- Want a plan with predictable employer contribution requirements
The contribution limits for SIMPLE IRAs are much easier as employees can contribute up to the annual elective deferral limit (expected to adjust for inflation in 2025). However, the rules for employers are slightly different. Employers have to do one of the following:
- Make a mandatory 2% nonelective contribution, or
- Provide a matching contribution of up to 3%
SIMPLE IRAs typically allow lower contribution limits than Solo 401(k)s or SEP IRAs, but they remain highly accessible for many small businesses. SIMPLE IRAs generally must be set up by October 1, 2025, unless you’re a new business that started after that date. Employer contributions are due by the tax filing deadline, including extensions.
Choosing the Best Strategy for Your 2025 Tax Savings Retirement Plans and Goals
The right retirement option depends on your income, business structure, cash flow, and long-term goals. Some business owners prefer the simplicity and flexibility of a SEP IRA, while others benefit from the aggressive contribution opportunities of a Solo 401(k). Employers with teams often find that a SIMPLE IRA offers the easiest way to support staff retirement savings.
If you aren’t sure which plan fits your situation, that’s a great time to reach out for personalized guidance.
Final Thoughts on 2025 Tax Savings Retirement Plans
Planning early for 2025 tax savings retirement plans can help you take advantage of higher contribution opportunities, build long-term security, and reduce your overall tax burden. Each option comes with important deadlines, contribution rules, and strategic advantages you can use to strengthen your financial future.
If you’d like help choosing the right plan or want guidance on setting up your contributions properly, contact us at Katherine M. Johnson, CPA. We’re here to help you make informed, confident decisions about your 2025 retirement strategy.
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