Whether you’re a new grad just starting your employment journey, or you’re an experienced professional just a few years from retirement, it’s never a bad time to increase your retirement savings. In fact, it can really help with your overall financial health and tax planning.
If you’re looking to reduce your taxable income and boost your retirement savings, you still have time to make key contributions before the April 15 tax deadline. Here are the best last-minute moves you can make:
1. Contribute to a Traditional IRA (and Maybe Deduct It)
- Deadline: April 15, 2025
- Contribution Limit: $7,000 ($8,000 if 50+)
- Why It Helps: If you qualify, your contribution is tax-deductible, which can reduce your taxable income for 2024 and lower your tax bill.
- Check Deduction Rules: If you have a 401(k) at work, your deduction may be limited based on income—check the IRS limits before assuming you get the full deduction.
2. Fund a Roth IRA (If You Qualify)
- Deadline: April 15, 2025
- Contribution Limit: $7,000 ($8,000 if 50+)
- Why It Helps: Even though Roth contributions aren’t tax-deductible, you’ll get tax-free growth and withdrawals in retirement.
- Income Check: If you make too much, you may need to use a Backdoor Roth IRA strategy (consult a tax pro if this applies).
3. Make a Last-Minute SEP IRA Contribution (If You’re Self-Employed)
- Deadline: April 15 (or October 15 if you file an extension)
- Contribution Limit: Up to 25% of net earnings, capped at $69,000 (2024 limit; 2025 may increase)
- Why It Helps: SEP IRA contributions are tax-deductible, reducing your taxable income even after December 31—one of the few plans that still allows this.
4. Max Out Your 401(k) (If Your Employer Allows It)
- Deadline: December 31 for employee contributions, but… some plans allow you to make employer contributions later.
- Contribution Limit: $23,000 ($30,500 if 50+)
- Why It Helps: If you own a business and have a solo 401(k), you may still have time to make employer contributions before April 15—which are tax-deductible.
5. Don’t Forget an HSA (If You Have a High-Deductible Health Plan)
- Deadline: April 15, 2025
- Contribution Limit: $4,150 (single), $8,300 (family), +$1,000 if 55+
- Why It Helps: HSAs aren’t retirement accounts, but they offer triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses.
Maxing Out Multiple Retirement Accounts
What if I Have Multiple IRAs?
It’s common to have more than one IRA. In fact, there’s no limit to how many you can have.
You can spread your retirement contributions across your IRAs, so long as your total contributions don’t exceed the current IRA cap. In other words, the annual IRA contribution limit applies to all IRAs combined, not per account.
Pro Tip: Rollover IRAs, which are funded from an old 401(k), don’t count toward the annual limit because they’re not new contributions.
What if I Have an IRA and a 401(K)?
Do you have an IRA (or multiple IRAs) plus a 401(k) plan? Then don’t worry!
You can max out a 401(k) and an IRA separately because they have independent contribution limits.
- 401(k) Contribution Limit (2025): $23,000 ($30,500 if 50+)
- IRA Contribution Limit (2025): $7,000 ($8,000 if 50+)
- If you’re contributing to a 401(k), your ability to deduct your IRA contributions depends on your income. If you’re above certain limits, you can still contribute to the IRA, but it won’t be deductible. (A Roth IRA may be a better option in this case.)
Confused about how to split your contributions? Let the Gordon Law tax team assist.
What If I Have a SEP IRA and Another IRA?
You can contribute to a SEP IRA and a Traditional/Roth IRA in the same year!
- SEP IRA Limit (2025): Up to 25% of net earnings, capped at $69,000 (2024).
- Traditional or Roth IRA Limit (2025): If you also want to contribute to a Roth or Traditional IRA, you can still put in $7,000/$8,000 (assuming you’re under the income limits).
Should I Max Out My Retirement Contributions?
Just because you can max out your retirement contributions, should you? Well, the answer—frustratingly—is that it depends. Here are some pros and cons of maxing out retirement contributions, no matter whether you have a 401(k) or IRAs.
Pros of Maxing Out Retirement Contributions
Let’s start out with why it can make financial sense to max out your retirement contributions before tax season.
- Reduce Taxable Income: Contributions to certain types of IRAs are tax-deductible, which lets you reduce your taxable income for the year.
- Invest in Your Future: Boosting your retirement contributions now can make retirement more financially comfortable for you and your loved ones.
- Catch Up on Savings: If you’re a little behind on retirement contributions, especially if you’re nearing retirement age, maxing out helps you play catch up.
Cons of Maxing Out Retirement Contributions
Pros aside, here’s when it might not be right for you to max out your retirement contributions just yet.
- High-Interest Debt: If you have tax debt or other expensive, high-interest debt, it may be best to focus on debt reduction before saving towards your retirement.
- Other Financial Priorities: Saving too much right now might compete with other life goals, such as saving for a down payment on a house or starting a business.
- Penalties for Early Withdrawal: If you put too much money into retirement accounts, you might need to withdraw funds before retirement age. You could face penalties and a higher tax bill.
It’s best to contact Gordon Law for advice tailored to your needs before you max out your retirement contributions, should you have any questions.
Want to Get the Most From Your Retirement Contributions? Contact Gordon Law!
There’s no doubt that tax planning—and retirement planning—are complex issues. There’s no “one size fits all” approach, and the right strategy for one individual may not work for you. That’s why, when you’re planning for the future, you should contact the Gordon Law tax attorneys.
Not only can our experienced tax lawyers help you reduce your taxable income and boost your retirement savings, but we can help you with every aspect of your financial planning, whether it’s avoiding tax debt or investing in a new business.
Don’t let retirement planning overwhelm you. Instead, discover what options you have for investing in your future by calling the Gordon Law team or reaching out online to schedule a consultation.
