How Much Can You Contribute to Your 401(k)? A Guide to Employer Plans vs. Solo 401(k)s
Saving for retirement is one of the smartest financial moves you can make, and 401(k) plans offer an efficient way to grow your nest egg with tax advantages. But not all 401(k)s are created equal, and the amount you can contribute depends on whether you have an employer-sponsored 401(k) or a Solo 401(k). Let’s break it down so you can maximize your retirement contributions.
What Is a 401(k)?
A 401(k) plan, named after a section of the IRS tax code, allows individuals to save for retirement with tax-deferred growth or tax-free withdrawals (if using the Roth option). These plans can be offered by employers or set up by self-employed individuals in the form of a Solo 401(k).
2025 Contribution Limits for 401(k) Plans
The IRS sets annual limits on how much you can contribute to a 401(k). These limits vary based on your age and the type of contributions you make.
| Age Group | Employee Contribution | Total Contribution (with employer match or self-employed profit-sharing) |
|---|---|---|
| Under 50 | $23,500 | $70,000 |
| Ages 50–59 | $23,500 | $77,500 |
| Ages 60–63 | $23,500 | $81,250 |
| Age 64 and older | $23,500 | $77,500 |
The total contribution limit includes all contributions made by the employee and employer (or profit-sharing contributions for Solo 401(k)s).
Prior Year Contributions
One unique advantage of Solo 401(k) plans is the ability to make contributions for the prior tax year. If you didn’t maximize your contributions for 2024, you can still contribute up to the 2024 limit—$22,500 for employees under 50 and $30,000 for those 50 and older—until the tax filing deadline in 2025. For most individuals, this deadline is April 15, 2025. However, if you file for an extension, you have until October 15, 2025, to make your 2024 contribution.
This retroactive contribution option is particularly beneficial for self-employed individuals or small business owners who may not know their exact income for the prior year until tax season. It allows them to adjust their contributions to maximize tax benefits and retirement savings. Be sure to inform your plan administrator that the contribution is for 2024 to ensure proper reporting.
Employer-Sponsored 401(k) Plans
With an employer-sponsored 401(k), employees can contribute up to $23,500 in 2025. Employers often match a portion of these contributions, typically up to a percentage of the employee’s salary. This match is essentially free money, making it a powerful incentive to contribute at least enough to maximize the match.
For example, if your employer offers a 100 percent match on the first 5 percent of your salary and you earn $100,000, contributing $5,000 ensures an additional $5,000 from your employer. Combined with other contributions, this can quickly add up to the annual limit.
Solo 401(k) Plans
If you’re self-employed, a Solo 401(k) offers even greater contribution flexibility. You can contribute to the plan as both the employee and the employer, allowing for much higher total contributions.
- Employee Contribution: Up to $23,500 in 2025 (or $30,000 if you’re 50 or older).
- Employer Contribution: Up to 25 percent of your net earnings from self-employment, with total contributions capped at the IRS limit.
For example, if you’re 55 years old with $200,000 in self-employment income, you could contribute $30,000 as an employee and up to $50,000 as the employer for a total of $80,000—well above the limits for a traditional employer-sponsored plan.
Special Catch-Up Contributions for Ages 60–63
From ages 60 to 63, individuals can take advantage of a higher catch-up contribution limit, adding an extra $3,750 to the total they can contribute. This special provision increases the total maximum contribution to $81,250 during those years, providing a significant opportunity to supercharge retirement savings.
Key Takeaways
Contributing to a 401(k) is one of the most effective ways to save for retirement, offering tax advantages and, in many cases, employer contributions. Employer-sponsored 401(k)s are a great option for employees, but Solo 401(k)s provide unmatched flexibility for self-employed individuals or small business owners.
In 2025, individuals under 50 can contribute up to $23,500 to their 401(k), with total contributions (including employer match or profit-sharing) capped at $70,000. Older savers benefit from catch-up contributions, with limits increasing to $77,500 for those 50 and older and $81,250 for ages 60–63.
Don’t forget, if you missed maximizing your 2024 contributions, you still have time in 2025 to catch up before filing your taxes. Whether you’re an employee or self-employed, knowing your 401(k) contribution limits helps you take full advantage of these powerful retirement accounts. Don’t leave money on the table—contribute as much as you can afford and watch your savings grow.
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Important Note:
uDirect is not a tax or legal advisor. Please consult your own tax or legal professional for guidance specific to your situation. The information provided here is for informational purposes only and should not be relied upon as financial, tax, or legal advice.
