IRS Updates 2025: What to Know About the New Solo 401(k) Contribution Limits

Key Points 

• The IRS has increased Solo 401(k) contribution limits for 2025, allowing self-employed individuals to maximize their retirement savings.
• Solo 401(k)s inherently offer high contribution limits and tax advantages.
• Broad Financial’s Self-Directed Solo 401(k) enables investments in alternative assets with real-time checkbook control.

A Solo 401(k) is a powerful retirement savings tool designed specifically for self-employed individuals and business owners with no full-time W-2 employees other than perhaps a spouse. It combines high contribution limits with tax advantages to give retirement investors an engine for accelerated retirement savings. In 2025, this account is more empowering than ever with increased contribution limits. Here’s a look at the IRS updates for 2025 as they relate to Solo 401(k)s, and how investors can diversify their retirement investments with a Self-Directed Solo 401(k).

2025 Solo 401(k) Contribution Limits

The IRS periodically adjusts retirement account contribution limits to account for inflation and cost-of-living increases. In 2025, Solo 401(k) account holders can take advantage of the following contribution limits:

• Under age 50: A maximum contribution of $70,000 annually.

• Ages 50–59 and 64+: A contribution limit of $77,500, which includes a $7,500 catch-up contribution.

• Ages 60–63: A special enhanced catch-up contribution increases the total limit to $81,250.

The tiered limits give individuals in different stages of their careers the opportunity to contribute more as they approach retirement. For comparison, the 2024 limits were $69,000 for those under age 50 and $76,500 for those over 50, underscoring modest but meaningful increases for 2025.

Why Choose a Solo 401(k)?

Solo 401(k) plans are built for self-employed individuals looking to save aggressively for retirement. These plans allow contributions as both the employer and the employee, significantly increasing the total amount that can be set aside each year. With the 2025 increases, self-employed investors have a great runway to grow their tax-advantaged savings.

Alongside the high contribution limits, Solo 401(k)s offer flexibility in tax treatment. Pre-tax contributions lower taxable income in the present, while Roth contributions provide the potential for tax-free growth and withdrawals in retirement. Having both options gives investors enhanced control over how and when their retirement funds are taxed, depending on their financial strategy.

Solo 401(k)s also offer the unique ability to borrow against the account. Investors can take out a loan of up to $50,000 or 50% of their account balance (whichever is lower), providing a liquidity option without triggering early withdrawal penalties. Of course, Solo 401(k) funds are generally meant to be saved, not spent—but the ability to take an emergency loan provides some added peace of mind.

Expanded Catch-Up Contributions for Ages 60–63

The 2025 enhanced catch-up contribution for individuals ages 60–63 increases the total Solo 401(k) contribution limit to $81,250. This adjustment provides a unique opportunity for those in the final stretch before retirement to accelerate their savings at a higher rate than ever.

For self-employed individuals, whose income patterns may fluctuate, catch-up contributions can help boost retirement funds during peak earning years. Those who started saving later or are looking to strengthen their financial position before retirement can use this provision to maximize tax-advantaged growth.

While traditional catch-up contributions help those over age 50 increase their savings, this special tier recognizes the need for additional contributions in the years just before retirement. It’s an important tool for investors refining their financial strategy, whether they’re optimizing tax advantages, closing a savings gap, or simply reinforcing their long-term financial security.

Maximizing the Tax Advantages of Solo 401(k)s

The tax advantages of Solo 401(k)s are a major draw for self-employed individuals. Contributions can be made on a pre-tax basis, reducing taxable income and deferring taxes until withdrawals begin in retirement. This structure is ideal for those expecting to be in a lower tax bracket later in life.

Alternatively, Roth Solo 401(k) contributions are made with after-tax dollars, allowing the account to grow tax-free. Qualified withdrawals, including both contributions and earnings, are not taxed in retirement. This option is particularly appealing to individuals who anticipate being in a higher tax bracket in the future.

Combining these tax strategies within a Solo 401(k) provides unparalleled flexibility and allows account holders to tailor their savings approach based on not only their financial goals for the future, but also their financial standing in the present.

Investing in Alternative Assets with a Self-Directed Solo 401(k)

For self-employed individuals seeking maximum flexibility in a retirement account, Broad Financial offers a Self-Directed Solo 401(k) that allows access to a broader range of asset classes beyond traditional stocks and bonds. You can use Self-Directed Solo 401(k) funds to invest in real estate, private placements, cryptocurrency, and many other alternative assets.

A key feature of Broad Financial’s Solo 401(k) is checkbook control, which allows you to manage everyday investment transactions in real time through a specialized trust and a dedicated checking account. Whether acquiring property, funding a private lending deal, or exploring cryptocurrencies, a Self-Directed Solo 401(k) offers the autonomy to execute investment decisions quickly, freely, and efficiently.

Getting Started with a Solo 401(k)

The 2025 IRS updates reinforce the Solo 401(k) as a powerful retirement account for self-employed individuals. Between the increased contribution limits and the flexibility of a Self-Directed Solo 401(k) with checkbook control, you can build a truly tailored (and tax-advantaged) retirement portfolio. Ready to take the next step? Contact us today!