To promote long-term financial security, the U.S. Congress has created a variety of tax-advantaged retirement accounts. These accounts provide substantial incentives for individuals to save, but they also come with complex rules governing contributions, withdrawals, and conversions. Understanding these rules is critical to maximizing tax benefits and avoiding penalties.

Types of Retirement Accounts

Retirement savings vehicles fall into three broad categories:

Individually funded accounts, such as Traditional IRAs and Roth IRAs, are opened and maintained by individuals.

Employer-sponsored plans, including 401(k) and 403(b) plans, often include employer matching contributions.

Self-employed retirement plans, such as SEP IRAs and Solo 401(k)s, are designed for business owners and freelancers

Contributions: Limits and Eligibility

2024 & 2025 Contribution Limits:

Up to $7,000 per year

Additional $1,000 catch-up contribution allowed for individuals age 50 and older

Deductibility and Income Limits

For Traditional IRAs, deductibility depends on the contributor’s income and whether they or their spouse are covered by a workplace retirement plan.

For Roth IRAs, contribution eligibility phases out at certain income levels:

Single filers: Begins at $146,000 (2024) and $150,000 (2025)

Married filing jointly: Begins at $230,000 (2024) and $236,000 (2025)

Contribution Deadline: Contributions for a tax year may be made up to the following year’s tax-filing deadline (e.g., April 15, 2025, for the 2024 tax year). Deadlines may be extended for disaster-related circumstances.

401(k), SEP IRA, and Solo 401(k) Contribution Limits (2025)

Employee Contribution Limit:

Up to $23,500

Additional $7,500 catch-up for individuals age 50+

New for ages 60–63: Additional $3,750 catch-up permitted

Total Annual Limit (Employer + Employee):

Up to $70,000, plus catch-up contributions as applicable

Extended Deadlines: SEP IRAs and Solo 401(k)s may be funded for 2024 up to October 15, 2025, if the taxpayer files an extension.