Introduction
Using retirement accounts to plan for the future allows you to save on taxes. Additionally, In an inflationary environment, money invested today carries more purchasing power than it will in a decade. So, take what savings you get from contributing each year and invest that money either into your business or into your trading accounts. IRA’s, SEP IRA’s, Simple IRA’s, 401(k)’s and defined benefit plans are just some retirement vehicles you can use to your advantage to plan your current and future taxes.
Why it Matters
- Immediate tax savings (for qualified accounts)
- Future tax savings and the ability to regulate taxable income (non-qualified accounts)
- Pushing your income into your retirement years when you expect to be at a lower bracket
- Savings discipline (if you have the money in your account, chances are you will spend it)
- Employer contributions (contribute up to max employer max 100% gains upon vesting)
- Asset protection (retirement accounts are protected in most scenarios)
- Social security is not guaranteed and not enough for many to live on
Contribution limits
- IRA Traditional and Roth-
- (2025) Up to $7,000 under age 50. Meanwhile, individuals age 50 and older can contribute up to $8,000. (1,000 catch up contributions)
- (2026) Up to $7,500 under age 50. Meanwhile, individuals age 50 and older can contribute up to $8,600. (1,100 catch up contributions)
- SEP IRA Traditional and Roth–
- (2025) Lessor of $70,000, 20% of self-employed earnings, or 25% of W-2 wages.
- (2026) Lessor of $72,000, 20% of self-employed earnings, or 25% of W-2 wages.
- Simple IRA Traditional and Roth–
- (2025) Up to $16,500 employee contribution, but for ages 50+, this increases to $20,000. Until you are age 60-63, you can contribute up to $21,750 for the year. In addition, the employer can make up to 3% matching contributions to the employee’s compensation.
- (2026) Up to $17,000 employee contribution, but for ages 50+, this increases to $21,000. Until you are age 60-63, you can contribute up to $22,250 for the year. In addition, the employer can make up to 3% matching contributions to the employee’s compensation.
- 401(k) & Solo 401(k) Traditional and Roth –
- (2025) Up to $23,500 under age 50. Meanwhile, employees aged 50 and older can contribute up to $31,000, and individuals aged 60-63 can contribute up to $34,750. (for age 50+ catch up contributions are $7,500, but for ages 60-63 are $11,250) Employers can match 25% of salary up to $70,000 total contributions between both Employee and Employer. Max Contributions for the year is the $70,000 + any catch-up contributions.
- (2026) Up to $24,500 under age 50. Meanwhile, employees aged 50 and older can contribute up to $32,500, and individuals ages 60-63 can contribute up to $35,750. (for age 50+ catch up contributions are $8,000, but for ages 60-63 are $11,250) Employers can match 25% of salary up to $72,000 total contributions between both Employee and Employer. Max Contributions for the year is the $72,000 + any catch-up contributions.
- Defined Benefit Plan-
- (2025 & 2026) Because defined benefit plan contributions involve complex calculations, an actuary is required to determine the correct amount.
Who can contribute
Keep in mind some items are subject to rules to be able to make contributions or just even to be deductible.
- IRA Traditional and Roth-
- Traditional – Anyone with taxable income. There are limits to how much is deductible.
- Roth – Anyone with taxable income. There are limits based on income on whether you can contribute directly to a Roth. However, you may do a conversion (back door).
- SEP IRA Traditional and Roth–
- Traditional & Roth – only the employer may contribute to this plan. (non-discrimination rules) contributions have to be the same percentage for all employees.
- Simple IRA Traditional and Roth–
- Traditional & Roth – Employee through salary deferrals and Employer contributions must do 3% match or 2% non-elective contribution for all eligible employees.
- 401(k) & Solo 401(k) Traditional and Roth –
- Traditional & Roth – Employee through salary deferrals and Employer contributions, doing matching contributions up to 25% of salary.
- Defined Benefit Plan-
- Employer contributions only
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