As another Cape Cod summer winds down, it’s the perfect time to take a look at your finances.
For many locals, the busy months are behind you, and year-end is when you finally get a chance to sit down and plan ahead.
One of the best ways to wrap up the year is by reviewing your year-end retirement contributions. Whether you’re running a small business or working year-round on the Cape, adding a little extra to your 401(k) or IRA before December 31 can lower your tax bill and help you build long-term savings.
Why It Pays To Contribute Before Year-End
In one word: taxes. The money you put into qualified retirement accounts can reduce your taxable income for the year. Plus, if your employer offers a match, you’re essentially getting free money just for saving.
For business owners, contributions to a SEP IRA, SIMPLE IRA, or solo 401(k) can make an even bigger difference since you’re contributing both as an employer and employee.
It’s not too late to start, even if you haven’t contributed much throughout the year. Many plans allow you to make contributions up until December 31, and in some cases, you have until tax filing time next spring.
How Much You Can Contribute In 2025
Here are the IRS retirement contribution limits for 2025:
- 401(k) plans: You can contribute up to $23,500 if you’re under 50. If you’re 50 or older, you can add another $7,500 as a catch-up contribution.
- Traditional or Roth IRA: You can contribute up to $7,000, or $8,000 if you’re 50 or older.
- SEP IRA (for business owners): You can contribute up to 25% of your compensation, capped at $70,000.
- SIMPLE IRA: You can contribute up to $16,500 if you’re under 50, or $19,500 if you’re 50 or older.
If you’re between ages 60 and 63, there’s an extra catch-up option under the SECURE 2.0 law that lets you contribute even more to your 401(k), as much as $11,250 on top of the standard limit, if your plan allows it.
But keep in mind that Massachusetts doesn’t always mirror every federal tax update, so before you make large contributions or Roth conversions, check with your local Cape Cod CPA to see how it’ll be treated on your state return.
For Employees: Maximize Your Workplace Plan
If you have access to a 401(k), SIMPLE IRA, or similar plan, check how much you’ve contributed so far this year. Many people set a percentage at the beginning of the year and forget to adjust it. If you have room left, you can bump up your contributions for your last few pay periods.
Even small adjustments make a difference; an extra $200 a paycheck can add up quickly, and every dollar you contribute lowers your taxable income for 2025. If you’re nearing retirement or already semi-retired here on the Cape, maximizing contributions in these last working years can make a big difference.
If your employer offers a match—such as the required company match on SIMPLE IRA plans—make sure you’re contributing enough to get the full amount. It’s one of the simplest ways to earn a guaranteed return.
For Individuals: Don’t Overlook Your IRA
If you don’t have a workplace plan, or if you want to save more, an IRA is a great option. You can open one at a bank or brokerage in just a few minutes.
A Traditional IRA may give you a tax deduction this year, depending on your income and whether you’re covered by a plan at work. A Roth IRA won’t give you a deduction now, but your withdrawals in retirement will be tax-free.
You have until April 15, 2026 (the tax filing deadline for 2025), to make your IRA contribution, but it’s better not to wait. The sooner you contribute, the sooner your money can start growing tax-deferred.
For Business Owners: SEP IRA vs. SIMPLE IRA
If you run a small business or work for yourself, you have several retirement plan options.
A SEP IRA is one of the easiest and most flexible choices for self-employed individuals or those without employees. You can contribute up to 25% of your net earnings, with a cap of $70,000 for 2025. The beauty of the SEP IRA is that you can decide how much to contribute after you see how the year turns out, making it perfect for Cape Cod’s seasonal businesses. You have until your business tax filing deadline, including extensions, to make your SEP contribution.
However, if you have employees, a SIMPLE IRA may be a better fit. SIMPLE IRAs are often preferred by small businesses because they’re easier to administer than 401(k)s and more flexible than SEPs when employees are involved. They also come with a required employer match, which makes them an attractive benefit for workers.
Your CPA can help you compare the options based on your income, number of employees, and goals.
Stay Mindful Of Deadlines And Limits
Deadlines vary depending on your plan. For 401(k)s, SIMPLE IRAs, and most workplace plans, contributions for the year must be made by December 31. For IRAs and SEPs, you generally have until tax filing time.
Be careful not to exceed the annual limits, as overcontributing can lead to penalties and extra paperwork. Your CPA can help you review your totals and make sure everything lines up correctly.
Talk To Us Before The Clock Runs Out
There’s still time to make your retirement dollars count for 2025, but the window closes fast. If you’re not sure which type of contribution makes the most sense for your situation, our team can help you run the numbers.
At Steven M. Ellard, CPA, we help individuals and small business owners across Cape Cod make smart financial moves before year-end. Together, we’ll look at your income, your goals, and your available options so you can finish the year on the strongest footing possible.