Roth, Super Catch-Ups, and More: Your Ultimate 401(k) Guide for 2025

Saving for retirement isn’t just a goal—it’s a strategy to secure your financial independence. It's one of the simplest things to do.... The key word is simple, not easy.

Whether you’re contributing to an employer-sponsored 401(k) or maximizing the flexibility of a Solo 401(k) (used by solo business owners), understanding your options can make a huge difference. In 2025, with new rules like super catch-up contributions and strategies like the mega backdoor Roth, there are more ways than ever to grow your savings and reduce taxes. Here’s how to use these powerful tools to build a stronger financial future.

1. What Are 401(k) Plans and Solo 401(k)s?

• 401(k) Plans: Employer-sponsored retirement plans that allow employees to contribute pre-tax or Roth dollars (if the plan allows) up to $22,500 annually in 2025. Employees aged 50+ can contribute an additional $7,500 as a standard catch-up contribution.
• Solo 401(k)s: Designed for self-employed individuals or small business owners without full-time employees. These plans allow significantly higher contribution limits by combining employee and employer contributions, up to $66,000 in 2025, or $73,500 if you’re 50+.

2. Roth Contributions

Roth 401(k) Options:

• Funded with after-tax dollars - this means you do not get a deduction on the front end like traditional 401(k) contributions.
• Earnings grow tax-free, and qualified withdrawals are tax-free.
• No income limits, making them accessible for high earners. Roth IRAs, on the other hand, do have income limits. [see all income limits and important 2025 numbers here]

Roth Solo 401(k)s:

• Include the same tax advantages as Roth 401(k)s.
• Offer flexibility for self-employed individuals to contribute larger amounts - This can be a good tool for business owners since their income is most likely above the Roth IRA contribution limits.

Key Consideration: Evaluate your current and expected future tax bracket to decide between Roth and pre-tax contributions.

3. Mega Backdoor Roth Strategy

A mega backdoor Roth allows high earners to contribute beyond the standard Roth limits by using after-tax contributions. The key is that your plan has to offer this as a feature. It is rare in a lot of plans but is very common with employer plans at large corporations [i.e. Raytheon].

How It Works:

1. Make after-tax contributions to your 401(k) (up to the total contribution limit of $66,000 for 2025).
2. Convert these contributions to a Roth 401(k) or a Roth IRA.

Requirements:

1. Your plan must allow after-tax contributions and either in-plan Roth conversions or in-service distributions.
2. Solo 401(k)s can potentially offer greater flexibility for executing this strategy if the TPA has the ability to include this in the plan. This can cause greater plan administration as well.

Potential Savings: High earners can maximize tax-free growth on larger contributions, making it a valuable option for retirement planning.

Watch my recent Youtube video for more: Supersize your Tax-Free accounts: How Mega Backdoor Roth 401k Contributions Work

4. New Super Catch-Up Contributions in 2025

Starting in 2025, participants aged 60-63 will be eligible for enhanced catch-up contributions. [IRS Guidance on this here]

• Contribution Limits: An additional $10,000 annually for traditional and Roth 401(k)s, bringing the total catch-up contribution to $17,500 for those eligible. Indexed for inflation in future years.

Why It Matters: These contributions allow older workers to supersize their retirement savings during their highest-earning years.

5. Key Considerations for Employees

• Employer Match: Always contribute enough to maximize your employer’s match. For example: If you receive a $6,000 match annually over 30 years, that’s $180,000 in direct contributions. With an average annual return of 7%, it could grow to over $566,000. [See post]
• Plan Features: Not all plans offer Roth contributions, after-tax options, or in-plan conversions. Check your plan’s rules. [401(K) Insights & Statistics]
• Investment Options: Review the funds available in your plan and choose options that align with your risk tolerance and goals. [More on Investing]

6. Key Considerations for Solo 401(k) Participants

• Higher Contribution Limits: You can contribute as both employer and employee, allowing you to save much more than in a traditional 401(k).
• Flexibility: Solo 401(k)s often allow after-tax contributions and Roth conversions, making it easier to execute strategies like the mega backdoor Roth.
• Business Income: Contributions are tied to your net income. Higher earnings allow for higher contributions.

Read more: Mastering Business and Wealth: A Guide for Business Owners

7. Tax Planning Opportunities

• Pre-Tax vs. Roth: Pre-tax contributions lower your current taxable income, while Roth contributions grow tax-free. The right choice depends on your tax situation.
• Conversions: A Roth conversion might make sense if you expect higher tax rates in retirement.

8. Final Thoughts

Both 401(k)s and Solo 401(k)s offer excellent tools to grow wealth and prepare for retirement. By understanding their features and leveraging strategies like the mega backdoor Roth and super catch-up contributions, you can optimize your savings and take advantage of tax benefits.

For personalized advice and a deeper dive into your specific retirement plan, consult a financial advisor who can help you navigate the complexities of retirement planning.

Visit my site -> finnprice.com

More on 401(k)s -> 401(K) Insights & Statistics

Subscribe to the Youtube Channel for more video content -> Finn Price Youtube

About the author: Finn Price, CPFA, CEPA, is a business owner and wealth manager at Railroad Investment Group. He helps successful entrepreneurs & individuals with concentrated stock positions in their 30s, 40s and 50s build, organize, protect and transfer their wealth.

Note: this article is general guidance and education, not advice. Consult your money person or your attorney for financial, tax, and legal advice specific to your situation.

Securities and advisory services offered through LPL Financial, a registered investment Advisor, Member FINRA/SIPC.