Business Owners Over 50 Can Defer $34,000 in 2027 — Every New Retirement Limit Explained

If you run a small business, the IRS just widened your 2027 retirement-savings runway. On November 12, the agency announced that the 401(k) employee contribution limit rises to $25,500 for 2027, up $1,000 from $24,500 this year. Owners and employees who are 50 or older can generally contribute up to $34,000, and those aged 60 through 63 get an even bigger catch-up. Here is every number that matters to an owner, plan by plan, and what to do before January 1.

What the IRS announced on November 12

The new limits appeared in IRS news release IR-2026-136 and in Notice 2026-66, the technical guidance that lists every retirement-related cost-of-living adjustment for tax year 2027. IRS Chief Executive Officer Frank Bisignano said the update gives taxpayers and employers the information they need to make retirement planning decisions for the year ahead.

Two changes stand out for business owners. The 401(k) deferral limit climbs by $1,000, and the SIMPLE IRA limits rise as well. The IRA contribution limit, by contrast, stays flat at $7,500.

The 2027 limits at a glance

• 401(k), 403(b), governmental 457(b) and Thrift Savings Plan employee deferral: $25,500, up from $24,500.
• Catch-up, age 50 and over (most plans): $8,500, up from $8,000. That brings the total for a 50-plus saver to $34,000.
• Catch-up, ages 60 to 63 (most plans): $11,750 instead of $8,500, up from $11,250 in 2026. That brings the total to $37,250.
• IRA contribution (traditional and Roth): unchanged at $7,500, with the age-50 catch-up unchanged at $1,100.
• SIMPLE IRA and SIMPLE 401(k): $17,500, up from $17,000.
• SIMPLE limit for certain applicable plans: $19,100, up from $18,100.
• SIMPLE catch-up: $4,000 for most plans (unchanged), $3,850 for certain applicable plans (unchanged), and $5,250 for ages 60 to 63 (unchanged).
• SEP IRA and overall defined-contribution cap: $75,000, up from $72,000, according to tax-publication coverage of Notice 2026-66. Confirm the figure with your plan provider.

The 401(k) limit is per person, not per plan. If you hold a job with a 401(k) and also run a side business with its own plan, your employee deferrals across those plans share a single cap.

What it means for each type of owner

Solo 401(k) and small-company 401(k) owners

A 401(k) lets you contribute in two roles: as the employee and as the employer. As the employee, you can defer up to $25,500 in 2027. Savers 50 and older generally can add $8,500, and those 60 through 63 can add $11,750 instead. The business can then contribute on top of that, subject to the plan's formula and an overall annual limit that tax publications put at $75,000 for 2027, not counting catch-up contributions.

Here is a simple illustration. Suppose a 55-year-old owner pays herself $150,000 in W-2 wages and her plan allows an employer contribution of 25% of pay. She could defer $25,500, add the $8,500 catch-up, and have the business contribute $37,500, for $71,500 in total. Sole proprietors and partners calculate the employer side from net self-employment earnings rather than W-2 wages, so their math differs. A CPA can run the exact figure for you.

If you pay yourself through an S corporation, your W-2 salary drives the employer contribution, which makes the split between salary and distributions matter more. Our guide to LLC vs. S corp explains that trade-off.

SIMPLE IRA employers

The standard SIMPLE IRA employee deferral rises $500 to $17,500. Certain applicable SIMPLE plans, which the SECURE 2.0 Act allows to carry a higher limit, go from $18,100 to $19,100. The catch-up for most participants 50 and older stays at $4,000, so a participant in a standard plan in that age group can defer up to $21,500. The catch-up for participants 60 through 63 stays at $5,250. Because every participant's ceiling moves, remind your team of the new number before the year starts.

SEP IRA owners

Only the employer contributes to a SEP IRA, so there is no employee deferral to raise. What matters is the overall limit, which coverage of Notice 2026-66 reports at $75,000 for 2027. SEP contributions are generally limited to the lesser of 25% of an employee's compensation or the annual dollar cap, and the owner's own contribution is generally limited to 20% of net self-employment income, so your real ceiling depends on your earnings.

Owners who also fund an IRA

The IRA limit stays at $7,500, but the income ranges that decide who can deduct a traditional IRA contribution or contribute directly to a Roth IRA all moved up for 2027:

• Traditional IRA deduction, single filers covered by a workplace plan: $83,000 to $93,000, up from $81,000 to $91,000.
• Traditional IRA deduction, married couples filing jointly where the contributor is covered at work: $133,000 to $153,000, up from $129,000 to $149,000.
• Traditional IRA deduction, contributor not covered at work but married to someone who is: $250,000 to $260,000, up from $242,000 to $252,000.
• Roth IRA eligibility, singles and heads of household: $158,000 to $173,000, up from $153,000 to $168,000.
• Roth IRA eligibility, married couples filing jointly: $250,000 to $260,000, up from $242,000 to $252,000.

The Saver's Credit income ceilings also rose. For 2027 they are $83,000 for married couples filing jointly, $62,250 for heads of household, and $41,500 for singles and married individuals filing separately.

Why a $1,000 bump matters to an owner

Contributions to a traditional 401(k) reduce your taxable income in the year you make them, while Roth contributions do not but can be withdrawn tax-free under the plan's rules. For an owner who is also the business's best-paid employee, the higher limit is simply more room to move profit out of the taxable column and into long-term savings. It also raises the ceiling for every employee on your plan, which can matter if your team likes to max out contributions.

Five moves to make before January 1

• Call your plan administrator. Ask what must be updated for 2027 and by when, especially for SIMPLE IRA notices to employees and for any plan that offers Roth catch-up contributions.
• Reset payroll deferral percentages. If you or your staff contribute a percentage of pay, check that the percentage will reach the new $25,500 cap rather than stop short of it.
• Run the cash math. Pull your latest profit and loss statement and decide how much profit you can commit to retirement without starving working capital.
• Automate it. Set up recurring transfers from your business bank account so contributions do not depend on year-end cash.
• Check the Roth catch-up rule. A separate SECURE 2.0 provision requires higher earners to make catch-up contributions as Roth. Coverage of the notice points to a $155,000 prior-year wage threshold, so ask your plan administrator how your plan applies it.

What to keep in mind

Your plan can set a lower limit than the IRS maximum, and employer contributions follow your plan document, not just the dollar caps. The figures above come from the IRS announcement and Notice 2026-66, with the SEP and overall-cap numbers drawn from tax-publication analysis of that notice. This article is general information, not tax advice, so confirm your own numbers with a CPA or plan provider before you commit funds.

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