Take Full Advantage of Retirement Savings Opportunities
- Latoya J. Jessamy
- 4 minutes ago
- 1 min read
Retirement plans remain one of the most powerful tax-saving tools available to small-business owners and self-employed professionals.
Establish or Fund a Retirement Plan Before Year-End
If you don’t yet have a retirement plan, setting one up before December 31 allows you to make both employee and employer contributions for 2025.
For a solo business, a 401(k) plan (often referred to as an “individual 401(k)” or a “solo 401(k)”) is an ideal option. Your owner-employee contribution limits for 2025 are:
$23,500 if under age 50
$31,000 if age 50–59 or over 64
$34,750 if age 60–63
Your employer contributions to your retirement account (remember, you are both employer and employee) can tally up to 25 percent of compensation, with a combined maximum of $70,000–$81,250 depending on age.
Use Available Tax Credits
If you started a new plan this year or plan to, you may qualify for valuable credits:
A start-up credit of up to $15,000 for new plans
A contribution credit of up to $3,500 per employee for employer contributions
An automatic-enrollment credit of $500 per year for three years
These credits directly reduce taxes owed, not just taxable income.
Consider a Roth Conversion
If your income is lower this year or your investments have declined, converting a traditional IRA or 401(k) to a Roth can be an attractive option. You’ll pay tax on the converted amount now, but future qualified withdrawals are tax-free, and Roth IRAs have no required minimum distributions during your lifetime.