Retirement Accounts & Tax Planning
Retirement accounts are the most powerful tax tools available.
Traditional IRA/401(k)
Tax-deferred
- Contributions reduce taxable income now
- Grows tax-free
- Pay tax on withdrawals in retirement
- Best if you expect a lower tax rate in retirement
- RMDs required at age 73
VS
Roth IRA/401(k)
Tax-free growth
- Contributions are after-tax
- Grows tax-free
- Withdrawals in retirement are tax-free
- Best if you expect a higher tax rate in retirement
- No RMDs for Roth IRAs
2025 Contribution Limits
AccountUnder 5050 and Over
IRA (Traditional or Roth)$7,000$8,000
401(k) / 403(b) / 457$23,500$31,000
SIMPLE IRA$16,500$20,000
SEP IRA25% of compensation, up to $70,000
HSA (Self-only / Family)$4,300 / $8,550+$1,000 catch-up (55+)
🆕 SECURE 2.0: Super Catch-Up (Ages 60-63)
Starting in 2025, participants aged 60-63 get a higher catch-up limit:
- 401(k)/403(b): $11,250 catch-up (total $34,750) instead of $7,500
- SIMPLE IRA: $5,250 catch-up (total $21,750) instead of $3,500
This enhanced catch-up applies only to ages 60-63. At age 64, it reverts to the normal catch-up amount.
Backdoor Roth IRA
If your income exceeds Roth IRA limits ($165K single / $246K MFJ), contribute to a Traditional IRA (non-deductible) then convert to Roth. Watch for the pro-rata rule.
Mega Backdoor Roth
If your 401(k) plan allows after-tax contributions, you can contribute up to the $70,000 total limit (2025), then convert the after-tax portion to Roth.
Required Minimum Distributions
Starting at age 73 (SECURE Act 2.0). Roth IRAs have no RMDs. Penalty for missing: 25% of the amount not withdrawn.
Roth Conversion
Convert Traditional IRA/401(k) to Roth — pay tax now, future growth and withdrawals are tax-free. Best done in low-income years. No income limit.