Small Business Retirement Plans – Which is Best for You?
January 14, 2018

One of the perks of being a small business owner is that you are the boss. You have freedom, autonomy, and…a ton of responsibilities. In fact, many benefits that are typically provided to you when you are an employee of a company are now yours to handle. One of the most important of those benefits is planning for retirement.

As a business owner, having an effective retirement plan allows you to plan for a more secure future, while providing tax advantages. As an employer, offering a retirement plan to your employees is an important benefit that loyal employees both expect and deserve. Frankly, retirement planning is essential to your short and long-term success.

Luckily, there are a few options that make retirement planning for small business owners fairly straightforward. While they each allow tax deferred growth, they differ in administrative detail and how employees are handled. Let’s explore the three most common options.

SEP-IRA – Simplified Employee Pension Plan
Good for sole proprietor looking for easy plan administration.
Available to any size business.
Only the employer funds the plan – no employee contributions.
Easy administration.
Flexible annual contributions – good if cash flow fluctuates.

Simple IRA – Savings incentive match plan for employees
Good for employee participation.
For small businesses, up to 100 employees.
Employees can make pre-tax contributions.
Employer must match employee contributions.

Self-employed 401(k) or Solo 401(k)
For sole proprietors who have no employees other than a spouse. (Note that independent contractors are not considered employees).
Offers most generous contribution limits allowing you to save quickly.
Traditional solo 401(k) contributions can be deducted from tax burden during the year they were made, and distributions will be taxed as ordinary income. An alternative is a Roth solo 401(k) which has no initial tax break, but allows you to take distributions in retirement tax free.

When you own a small business, thinking about retirement is often not at the top of your very long to-do list. But, setting aside a little time to plan will benefit you today and well into the future. Contact us to determine the best retirement planning strategy for your small business.


Recent Posts

Did You Make a QCD From Your IRA? Tell Your Accountant

Did You Make a QCD From Your IRA? Tell Your Accountant

As we navigate the complex world of tax planning, there's a valuable strategy that might have flown under your radar – Qualified Charitable Distributions (QCDs) from your Individual Retirement Account (IRA).  In this blog post, we shed light on the potential...

BOI Reporting – What You Need to Know

BOI Reporting – What You Need to Know

As the new BOI reporting era kicks off on January 1, 2024, we are here to guide you through the process and ensure compliance with these significant regulatory changes.

Your Guide to 1099s

Your Guide to 1099s

Many taxpayers are familiar with W-2’s. You likely received one when you worked your first job. As you get older, it is common for your taxes and the paperwork surrounding your taxes gets more complicated.

If you are beginning to receive (or issue) 1099s this guide can help you understand in greater detail what that entails.


Reach out for a consultation.