Can You Have Multiple Retirement Plans?
Juggling multiple retirement accounts? Understand the framework governing your total savings to coordinate contributions and optimize your financial strategy.
It is possible and increasingly common for individuals to have multiple retirement savings plans, often due to changing jobs, side businesses, or supplementing a workplace plan with personal savings. While contributing to more than one account is an effective way to build retirement wealth, it requires understanding the contribution rules to maximize savings and avoid penalties for excess contributions.
Understanding Retirement Contribution Limits
Managing multiple retirement accounts rests on understanding the distinct contribution limits set by the Internal Revenue Service (IRS). These limits are not a single number but a series of tiered rules that apply differently depending on the type of contribution and the plan.
The employee elective deferral limit is a per-person cap on the maximum amount an individual can contribute from their salary into all workplace retirement plans combined. For 2025, this limit is $23,500. This cap applies collectively to plans like 401(k)s, 403(b)s, and most 457 plans, meaning your total contributions across all of them cannot exceed this single figure.
To help individuals nearing retirement, the tax code allows for catch-up contributions. For 2025, individuals age 50 and over can contribute an additional $7,500 to their workplace plans. A provision in the SECURE 2.0 Act created a larger catch-up amount for those ages 60 through 63, allowing them to contribute an extra $11,250 in 2025. This is in addition to the standard employee elective deferral limit.
A separate rule is the overall contribution limit, which applies on a per-plan basis. For 2025, this limit is $70,000 per plan. This cap includes the employee’s elective deferrals, any employer matching funds, and employer profit-sharing contributions. Because this is a per-plan limit, you can contribute substantially to one plan while also contributing to another.
Individual Retirement Arrangements (IRAs), including Traditional and Roth IRAs, have their own separate contribution limits. For 2025, the IRA contribution limit is $7,000, with an additional $1,000 catch-up contribution for those age 50 and over. This limit is independent of the 401(k) elective deferral limit. However, your ability to deduct Traditional IRA contributions or to contribute to a Roth IRA can be restricted by your income if you have an employer-sponsored plan.
Applying Limits to Common Plan Combinations
Understanding how the contribution limits interact is best illustrated through common scenarios. Each situation applies the per-person and per-plan limits differently, creating distinct savings parameters.
Consider an individual who works for two different companies during the year, each offering a 401(k) plan. The employee’s contributions to both plans are subject to the single employee elective deferral limit of $23,500 for 2025, meaning the total salary deferred into both plans combined cannot exceed that amount. The catch-up contribution for those age 50 and over also falls under this per-person umbrella.
A frequent combination is a 401(k) at work and a personal IRA. In this case, the contribution limits are independent. An individual can contribute the maximum to their 401(k) and also contribute the maximum to their IRA, allowing for a combined savings of $30,500 for those under age 50. Remember that your income level may phase out the tax-deductibility of a Traditional IRA contribution if you have a workplace plan.
It is common for people to have a job with a 401(k) and a side business with self-employment income. This allows for contributions to both a 401(k) and a self-employed plan, such as a SEP IRA. The 401(k) contributions are governed by the employee elective deferral limit. Contributions to the SEP IRA are considered employer contributions from the business, based on a percentage of self-employment income up to 20% of net adjusted earnings. These employer contributions do not count against the 401(k) deferral limit, but total contributions to the SEP IRA cannot exceed the overall per-plan limit.
Tracking Contributions and Correcting Excess Amounts
While each employer’s plan administrator will monitor contributions to their specific plan, they have no visibility into other accounts you may hold. You are responsible for aggregating your contributions from all sources to ensure you do not breach the per-person elective deferral limit.
To stay compliant, you must track your contributions throughout the year. The most effective method is to regularly review your pay stubs from each employer, which detail your year-to-date retirement plan deferrals. Cross-referencing these with your account statements from each retirement plan provider offers a clear picture of your total contributions.
Failing to correct an excess contribution carries tax consequences. The excess amount is subject to income tax in the year it was contributed. If it is not withdrawn by the tax filing deadline, it will be taxed again when it is eventually distributed from the plan, resulting in double taxation.
If you discover you have contributed more than the elective deferral limit, you must take corrective action before the tax filing deadline for that year, such as April 15. You need to contact one of your plan administrators and request a corrective distribution of the excess amount plus any investment earnings. The returned excess contribution must be reported as taxable income for the year the contribution was made, and the distributed earnings are taxable in the year they are returned to you.