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Need a Retirement Plan for Your Small Business?

best retirement plans for small business

Please note : This article may contain outdated information about RMDs and retirement accounts due to the SECURE Act 2.0, a law governing retirement savings (e.g., the age at which individuals must begin taking required minimum distributions (RMDs) from their retirement account will change from 72 to 73 beginning January 1, 2023). For more information about the SECURE Act 2.0, please read this article  or speak with your financial consultant. (1222-2NLK)

Dear Carrie,

My wife started a business 10 years ago and contributed to a regular IRA in the beginning. Three years ago, she incorporated the company and they don't have a 401(k) yet. What's her best option for retirement savings right now?

Dear Reader,

This is an excellent question for every small business owner—whether firmly established or just starting out. That's because, although contributing to an IRA is definitely a good idea, small business owners have several other options that can significantly increase the amount they can save in a tax-effective way.

Here are some small business retirement plans for your wife to explore. Incorporation isn't the key factor here, but rather whether your wife has employees and, if so, how many. All provide tax advantages without the paperwork, cost, and administration required by a 401(k), but do have different characteristics that might make one plan better than another for her needs.

SEP-IRA: The easiest to set up and maintain, particularly suited to sole proprietors

A SEP-IRA (or a Simplified Employee Pension) can be a great choice for saving a lot and keeping paperwork to a minimum whether or not you have employees. It's easy to open and lets you make fairly high annual contributions. It also gives you the flexibility to vary contributions—or skip them entirely—according to your yearly business needs.

A SEP-IRA can be ideal for a sole proprietor. Annual contributions can be as high as 20% of net self-employment income for an owner, up to 61,000 in 2022. However, there are a few caveats if you have employees.

First, all contributions are made by the employer, not the employee. And, as an employer, you're required to contribute the same percentage of an employee's compensation as you contribute for yourself. That could end up being a hefty sum if you have more than a few employees.

Individual 401(k): Offers higher contribution limits if you have no employees except your spouse

An Individual 401(k) or an Individual Roth 401(k) can be a great choice for contributing a lot, but it's only available if you work for yourself and your only employee is your spouse.

It requires a little more paperwork than a SEP, but allows even higher contributions—20% of net self employment income for the business owner, plus an additional $20,500 in salary deferrals for 2022, with a maximum of $61,000 for this year. If you're 50 or older, you can contribute an additional $6,500, bringing the maximum to $67,500.

If your spouse is also an employee, he or she can also contribute up to $20,500 in salary deferrals (plus a catch-up contribution of $6,500 if age 50-plus). And you, as the employer, can match that contribution up to 20% of salary subject to the same maximums. That all adds up to quite a significant sum!

SIMPLE-IRA: Good if you have up to 100 employees and want them to contribute to their own retirement

A SIMPLE-IRA (or Savings Incentive Match for Employees) is available to companies with 100 or fewer employees. With this plan, employees make their own retirement contributions—up to $14,000 for 2022, with a catch-up contribution of $3,000 for those age 50-plus. As the employer, you're required to make a small matching contribution (up to 3% of employee compensation) or contribute a flat 2% of compensation.

While your obligation as an employer is less, the contributions you can make for yourself are also significantly lower than for a SEP-IRA or Individual 401(k). That's because the business owner is subject to the same contribution limits as employees.

A regular IRA: Still a smart personal choice

The good news is that you can contribute to both a small business retirement plan and a traditional or Roth IRA. You may still be eligible for a tax deduction with traditional contributions, depending on your income. So I encourage your wife—and you, too—to contribute the maximum to an IRA each year. For 2022, that's $6,000 with a $1,000 catch-up contribution if you're 50 or older.

The bottom line: Talk to your tax advisor

As you can see, there are a number of options for small businesses, depending on how many employees there are and the type of opportunity a business owner wants to provide for employees.

The next thing for your wife to do is to talk to her tax advisor—and also any business partners—to determine which plan offers the best combination of savings opportunities and tax advantages for her specific business. While all of these plans require minimal set-up and administration, the details vary. It's best to get all the facts , and then weigh them in light of current business plans and future goals.

Have a personal finance question? Email us at   [email protected] Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,   contact Schwab.

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Small-business retirement plans

When it's time to choose a retirement plan for your business, there are a lot of moving parts to consider. It may help to start with which plan works for the number of people you will cover, since that will help narrow down your options. From there, you can compare the rest of the details.

Compare Fidelity's small business plans

We offer retirement plans for businesses of every shape and size. Visit the following product pages for more information. If you have a separate retirement plan established and would like to invest the assets in a Fidelity brokerage account, you may be interested in an Investment-Only Retirement account . 1

If you have an existing 401K plan for your employees under another provider, learn more about the support and value we can deliver with a Fidelity 401(k) .

Interested in a Fidelity HSA ® for your small business? Learn more

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For a SEP IRA or a SIMPLE IRA , get started online

For Self-Employed 401(k) and Investment-Only start the paperwork

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The Best Retirement Plan Options for Small Business Owners 2023

Adam Uzialko

Regardless of their size, small businesses have many options for employee retirement plans they can offer as part of their benefits package.

Choosing the right retirement plan for your small business starts with researching all the options available to you and your employees. Analyze who your employees are and what retirement plan options make the most sense for them, then choose one that aligns with your small business’s needs and values.

Several different types of small business retirement plans are available, and plan providers have affordable, accessible options designed for even very small businesses. There are also some tax advantages that can offset the expense of sponsoring a small business retirement plan.

You can choose from simple plans that anyone can open, plans designed for self-employed people with no employees, or employer-sponsored retirement plans for small businesses that employ anywhere from two to 100 workers. Read on to learn more about the small business retirement plan options available to you and some tips to help you decide which ones you want to discuss with your CPA or financial advisor.

If you already know which type of plan you want, check out our best picks page to see which plan providers we recommend.

Editor’s note: Looking for the right employee retirement plan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Tax advantages for small businesses

The government offers the Retirement Plans Startup Costs Tax Credit to help small businesses offer retirement plans to their employees. It allows you to deduct up to 50% or $500 of plan startup and administration costs for the first three years of your plan.

If you match or make contributions to employee accounts, that money is also tax deductible . It allows you to contribute to your own retirement savings plan, and like your employees, you have the option of elective deferrals that may allow you to lower your income tax bracket. Also, depending on your income, you may qualify for the Saver’s Credit .

Additional tax credits may soon be available, as federal lawmakers seek to make retirement plans more accessible and affordable for small business owners. For example, one bill under consideration would provide a tax credit to small businesses that auto-enroll their workers in their retirement plans.

Key takeaway: The government incentivizes small businesses to provide employee retirement plans with tax credits. You can deduct up to 50% or $500 of plan startup and administration costs for the first three years of your plan.

Do small businesses have to offer retirement plans?

The short answer is no. In fact, no private businesses in the U.S. are required to offer retirement plans to their employees. Many companies offer retirement plans as part of benefits packages to help attract and retain talent. For smaller companies, offering retirement plans may help bring in new workers, but it also may be the right thing to do for your existing employees.

Depending on your situation, it’s important to consider how retirement plans will impact your business and its employees. Benefits like retirement plan options or healthcare can be a major tipping point for employees who are waffling between staying loyal to your company and taking their talents elsewhere.

Key takeaway: There are no laws requiring small businesses to offer employee retirement plans. However, doing so can help you attract and retain top talent.

Retirement plan types

Here are some points to consider that may help you decide which type of retirement plan you want to explore. Scroll down or click on the links below to learn more about each type of plan. Because sponsoring a retirement plan for your small business is a big step, you should consult your financial advisor and CPA on which type is the best option for you and your business. Once you choose a plan type, you should call multiple companies to get pricing quotes specific to your business.

If you have employees and want …

If you’re a sole proprietor and want …

Key takeaway: Small businesses of all types have a wide selection of employee retirement plans, including traditional 401(k), SIMPLE IRA and solo 401(k) plans.

Traditional 401(k)

This is perhaps the best-known type of retirement plan. The difference between IRA and 401(k) plans is that 401(k)s allow employees to contribute a higher dollar amount to their accounts, allow employees to take out loans from their retirement savings, and usually offer employees a choice of pretax and Roth contributions.

Key takeaway: The traditional 401(k) is the most popular type of employee retirement plan. It allows employees to set aside pretax money to be invested in an account of their choosing. Employer matching contributions are optional.

Safe harbor 401(k)

A safe harbor 401(k) is a variation of the traditional 401(k) plan that isn’t subject to an annual IRS nondiscrimination test. This allows the business owner and highly compensated employees to make maximum contributions to their retirement accounts. However, employers are required to match or contribute to employee retirement accounts, and these funds are immediately 100% vested.

Key takeaway: The safe harbor 401(k) is similar to a traditional 401(k), except that it requires employer matching programs and is not subject to an annual IRS nondiscrimination test.

Solo 401(k)

A solo 401(k) is a retirement savings plan designed for self-employed individuals who want to maximize their retirement contributions. It’s also referred to as an individual 401(k) or i401(k). Only the business owner and their spouse may participate in this type of plan; business owners with employees do not qualify for it.

Key takeaway: This plan is designed for self-employed entrepreneurs who want a way to save for their own retirement. Only the business owner and their spouse can participate.

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a small business retirement plan that is easy to set up and has low contribution and matching requirements for employers. It allows employees to contribute more than they could with traditional or Roth IRAs.

Key takeaway: A SIMPLE IRA is a way for employees to contribute more money than they can with a 401(k) plan. It has low employer contribution and matching requirements.

A Simplified Employee Pension, or SEP IRA, is a retirement savings plan that’s inexpensive for employers to establish and easy to maintain. Employer contributions aren’t required annually, making it a good option for business owners who only want to contribute during high-profit years.

Key takeaway: A SEP IRA is designed for employers who want to choose when they make contributions to the plan. For example, it allows them to only make contributions during high-profit years.

Traditional IRAs

Individual retirement accounts (IRAs) are the simplest type of retirement accounts to set up. Furthermore, nearly everyone is eligible – freelancers, business owners, and even people who already have employer-sponsored retirement plans. This type of plan is a popular option for people who have 401(k) assets from previous jobs that they need to roll over into a new retirement account. There’s usually no cost to set up an IRA, but you will pay trading fees and fund expense ratios.

This type of retirement account allows you to make annual tax-deductible contributions, depending on your modified adjusted gross income and whether or not you have a workplace-sponsored account. Earnings on principal and interest accumulate on a tax-deferred basis.

Key takeaway: A traditional IRA is the easiest retirement plan to set up. Anyone is eligible to participate. There are usually no setup costs.

This type of retirement account differs from traditional IRAs in that contributions aren’t deductible; rather, you’ve already paid income taxes on the money you invest, allowing interest to grow tax-free. It also has no age limits on contributions and has different withdrawal rules.

Key takeaway: Contributions to a Roth IRA are not tax deductible. Employees can continue contributing to the account regardless of their age.

As with all major financial decisions, consult your CPA, tax advisor or financial advisor for retirement and investment advice specific to you and your business. The information in this article is general and shouldn’t be considered financial, legal or tax advice.

best retirement plans for small business

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Get a retirement plan that’s right for your business

We offer a variety of tax-advantaged small-business plans for self-employed professionals, entrepreneurs, and business owners and their employees.

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Consider small-business retirement plans.

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Individual 401(k)

An Individual 401(k) maximizes retirement savings if you're self-employed or a business owner with no employees other than a spouse. We also offer an Individual Roth 401(k) option.

Learn about Individual 401(k)s

With generous contribution limits, the SEP-IRA (Simplified Employee Pension) plan is the simplest, most flexible, tax-deferred retirement plan you can sponsor.

Learn about SEP-IRAs

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a great starter plan that encourages employees to contribute.

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Our program for small- and mid-sized businesses is a high-quality, easy-to-administer retirement offer for 401(k) plans, 403(b) plans and other retirement plan types.

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Why choose Vanguard for your small business?

Selecting Vanguard for your retirement plan means you can expect high-quality, low-cost funds; investment flexibility; and exceptional service—all from a partner trusted by businesses like yours to align with our clients' interests.

Jump start your savings

As a small-business owner, planning for your retirement is entirely up to you. And if you employ others, you'll be helping them get on the right track for retirement too.

Benefit from tax breaks

All retirement plans offer tax-deferred growth on earnings. As an employer, you also benefit from tax-deductible employer contributions.

Give your money a chance to grow

In addition to your plan contributions, the compounding of interest, dividends, and capital gains allows your account to generate earnings on top of earnings.

Attract and retain employees

Offering a retirement plan to your employees can keep you competitive in the job marketplace and help your business flourish.

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Size up your retirement plan

Get to know the retirement plans that Vanguard offers for small businesses: the SEP-IRA, the SIMPLE IRA, the Individual 401(k), and the Small Plan 401(k). Try our interactive tool to see which plan may be best for you and your business.

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Move your plan to Vanguard

Consider moving the small-business plan you hold elsewhere to Vanguard. You can enjoy high-quality, low-cost funds and reliable service for your portfolio.

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best retirement plans for small business

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5 Types of Retirement Plans for Small Business Owners

Small business owners are different from the average hourly employee in a lot of ways. One often-overlooked difference is how they plan for retirement. Although small business owners may offer a classic 401(k) for their workers along with other benefits such as insurance and other perks, such a plan may not be the right option for the owner of the company. Instead, you may want to consider a few of these other retirement planning tools.

There are three overarching categories of plans that aim to meet both owner and employee needs, and they all use investing in stock as a means to grow funds over time. Then, there are a few options under each of these umbrellas. Understanding the limitations and benefits of each option can help with business planning and overall small business strategy, including tax planning. 1 You can use the tips and information below to help you decide which option is appropriate for you and your company.

IRA-Based Plans

IRA stands for “Individual Retirement Arrangement.” It is perhaps the easiest form of retirement planning, so many small business owners who are also employers prefer to use this type of retirement plan. Although many people assume that they need to establish IRAs on their own, employers can use these plans for themselves and their employees as well.

You should keep some additional financial considerations in mind, however. Specifically, even as a business owner, the most you can contribute to an IRA is still $6,000 in 2019 and 2020. 2

Defined Contribution Plans

A defined contribution plan differs only slightly from an IRA. 3 However, these plans are more commonly used by larger employers that have many employees. The contribution is most often a combination of an employee’s percentage-based contribution and an employer match contribution. The 401(k) is by far the most widely used retirement plan for businesses, but it may not be the best option for small businesses.

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Retirement plans for the self-employed range from the good to the outrageously good, and can allow you to save much more than you ever could with a traditional employer plan. A well-chosen retirement plan can allow entrepreneurs and the self-employed to bankroll a bright retirement.

The self-employed have several plan options, including defined contribution plans such as a solo 401(k), SEP IRA and SIMPLE IRA. But they also have some defined benefit options, too.

Here are the details on some of the best retirement plans, how much you can sock away and which plan may be best for you.

Retirement accounts for the self-employed

One of the downsides of being self-employed is that you don’t automatically get the perks offered by many employers, such as a 401(k) plan with a company match on your contributions. But in some regards, self-employed retirement plans can vastly exceed those regular options.

Here are three of the most popular defined contribution plans and who could find them useful.

Solo 401(k)

The solo 401(k) gives you all the advantages of a company 401(k) plan and then gives you even more benefits. You can select traditional or Roth 401(k) options, meaning you’ll get the ability to contribute before-tax or after-tax dollars. You can invest in virtually any asset class, too. Pick a broker that offers a free solo 401(k) – Fidelity and Schwab are good choices – and you won’t pay extra fees.

With a solo 401(k), you can make an employee contribution – up to $20,500 in 2022 – as well as an employer contribution up to 25 percent of your company’s profits, up to a total deposit of $61,000 between the two. Those aged 50 and older can add an additional $6,500 as a catch-up contribution.

As you can see, you can quickly go above where a company’s 401(k) plan usually tops out.

Who it may be best for: One-person businesses or those with one person and a spouse. May work well for those with a side gig (see below) as well as those earning a lot of money.

A SEP IRA allows the self-employed to create a retirement plan for themselves as well as employees. This kind of plan offers a tax-deferred way to save – with the rules of a traditional IRA – but supercharges it, with a $61,000 maximum annual contribution limit in 2022. And using a SEP IRA won’t preclude you from using a traditional or Roth IRA (which you really should do).

A SEP IRA allows the business to make employer contributions to employees, including the self-employed person. The business can contribute the lesser of 25 percent of its profits or the annual maximum. It’s a widely available plan, with many brokers offering access. However, there is no Roth option and all employees must receive the same percentage contribution.

Who it may be best for: Better for the high-earning self-employed, especially those in one-person outfits.

The SIMPLE IRA is an easy way for small employers, including the self-employed, to offer employees a retirement plan. The SIMPLE IRA can be easier for an employer to set up than many 401(k) plans, which have complex rules. Employers with 100 employees or fewer earning more than $5,000 can set one up.

The SIMPLE IRA uses the rules of a traditional IRA, so it’s tax-deferred and has the same withdrawal requirements at retirement. Employees can have wages deducted from their paychecks and can defer up to $14,000 annually, with those over age 50 allowed a $3,000 catch-up contribution, as of 2022.

Employers must add to the account, and they have a couple choices: (1) They can match contributions up to 3 percent of salary, or (2) They can contribute up to 2 percent of a worker’s salary up to the annual compensation limit of $305,000 in 2022. Employees are fully vested as soon as they receive the money, so any contribution becomes theirs immediately.

Who it may be best for: Better for businesses with at least a few employees and may allow companies to offer a lower total retirement benefit than other plans do.

Other options for the self-employed

Those three defined contribution plans are among the most popular, but the self-employed should also be aware that they can set up a defined benefit plan. A defined benefit plan can allow you to sock away even larger amounts on a tax-deferred basis, but they’re better suited to consistently higher-earning individuals.

“These are worthwhile to consider if your self-employment income is substantial,” says Dan Sudit, a partner at Crewe Advisors in Salt Lake City. “The contribution limit is based on a variety of factors including age, income, and years in business, but the annual benefit limit can exceed $200,000 a year.”

However, defined benefit plans can be more cumbersome to set up and generally cost more to maintain. But if you contribute enough, those costs may be worth the trade-off.

“In certain circumstances, depending on whether you make consistent contributions versus a large lump-sum contribution, it can be an effective tool in contributing substantially more dollars to your retirement savings than the other standard qualified retirement plans,” Sudit says.

For most individuals, a defined benefit plan is not really a worthwhile option, but that depends on your individual financial situation and especially your income.

Which self-employed retirement plan is best?

The right self-employed retirement plan depends so much on your individual circumstances, but for those who are the company’s sole employee (also including a spouse), the solo 401(k) is a great pick. It allows you all the benefits of a “normal” company-sponsored 401(k) plan and then takes it up a few notches.

Sudit acknowledges the need to fit the plan to your personal circumstances, but says, “I have a preferential bias to the solo 401(k), because it offers the best of all worlds, taking the greatest benefits of all the other retirement deferral options listed above, with the ability to pick and choose what is best for you.”

He explains: “It allows the maximum contribution as an employee, the maximum combined employee/employer contribution, Roth optionality, and generally, tremendous flexibility and other significant advantages allowing self-employed earners to maximize their retirement contributions.”

Let’s unpack those benefits:

When you’re eventually ready to take distributions from your retirement account, you’ll want to consider the top withdrawal strategies that maximize your account and extend your savings.

A solo 401(k) may be better than a SEP IRA

The solo 401(k) even has another more subtle benefit that may make it a better pick than the SEP IRA for low earners or those who are using their business as a side gig.

The solo 401(k) allows you to contribute up to 100 percent of your salary, up to the employee’s annual maximum. In other words, in 2022 the first $20,500 that you earn can be stuffed away in the solo 401(k), saving you on taxes. In contrast, the SEP IRA allows you to contribute at a 25 percent rate, so you’d have to earn substantially more to reach the same contribution level.

On top of this benefit, the solo 401(k) allows you to max out the employer contribution, too. Once you hit the employee maximum, you can still contribute at a 25 percent rate from your company’s remaining profits, up to the annual maximum. So in contrast to the SEP IRA, you’re able to contribute more to your retirement plan at a lower level of income, all else equal.

Those are some of the biggest differences between the solo 401(k) and SEP IRA, but it can be useful to understand the full range of differences between the two popular programs .

Annual 401(k) maximum is capped

It’s worth noting that the annual maximum contribution to all 401(k) plans is capped, and you may not deposit the annual maximum at your main job and then sock away another annual maximum from your side hustle, too. So you get $20,500 (in 2022) across all your 401(k) plans.

That said, if you max out your employee contribution at your main job, a solo 401(k) does allow you to still make an employer contribution at the rate of 25 percent of your company’s earnings. So it’s a perfectly legal way to save even more through the power of a solo 401(k).

This self-employed retirement calculator can help you figure out which plan may be best for you.

IRAs are still an option for the self-employed

Even if you participate in a retirement plan as a self-employed individual – including the SEP IRA or SIMPLE IRA – you still have the ability to participate in a traditional IRA or a Roth IRA .

So you can max out your contributions in any of the above retirement plans and still take max advantage of your own personal IRA. For 2022, that means you can contribute up to $6,000 each year (plus a bonus $1,000 if you’re over age 50.)

You’ll enjoy all the benefits of an IRA, including tax-deferred growth, and can take advantage of what many experts see as the best retirement account going – the Roth IRA .

Bottom line

The retirement plan that works best for you depends on your situation. While the solo 401(k) is generally a great pick, it’s a non-starter if you employ more than you and your spouse. So to pick the right plan, you’ll want to think carefully about your needs and where your business is going.

“Choosing the right one requires thoughtful planning, because if you rush or are sold on one strategy versus carefully considering your needs and circumstances, you may find yourself feeling short-changed and ill-prepared for your retirement,” Sudit says.

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The Bottom Line

Small Business

Retirement Strategies for Small Business Owners

Amy Fontinelle has more than 15 years of experience covering personal finance, corporate finance and investing.

best retirement plans for small business

As a small business owner, you are completely responsible for your own retirement planning. If you have employees, you may feel responsible for helping them plan for a successful retirement. The considerations and retirement savings plans that work you, as a small business owner, should be paramount when planning for both your own retirement and that of your employees.

Choose a Traditional Retirement Strategy

There are some traditional options other than using your small business to fund your retirement, such as IRAs and 401(k)s, that function as additional sources of retirement income other than liquidating your small business.

Establish a SIMPLE IRA:  The savings incentive match plan for employees, or SIMPLE IRA , is one retirement plan available to small businesses. In 2022, employees can defer up to $14,000 of their salary, pretax (rising to $15,500 in 2023). Those who are 50 or older can defer up to $17,000 by taking advantage of a $3,000 catch-up contribution. The catch-up contribution rises to $3,500 in 2023, so the total that those who are 50 or older can defer is $19,000. However, employees who participate in other employer-sponsored plans can contribute no more than $20,500 in all employer-sponsored plans combined (rising to $22,500 in 2023).

Employers can match employee contributions to a SIMPLE IRA up to 3% of the employee’s compensation. Conversely, employers can contribute 2% of each eligible employee’s compensation of up to $305,000 in 2022 (rising to $330,000 in 2023). Employer contributions are tax-deductible.  

Small Business Owners on Retirement: Remington, IN

Set up a SEP IRA:  A simplified employee pension (SEP) is another type of individual retirement account (IRA) to which small business owners and their employees can contribute. In 2022, it lets employees make pretax contributions of up to 25% of income or $61,000 (rising to $66,000 in 2023), whichever is less. Like a SIMPLE plan, a SEP lets small business owners make tax-deductible contributions on behalf of eligible employees, and employees won’t pay taxes on the amounts an employer contributes on their behalf until they take distributions from the plan when they retire.

Almost any small business can establish a SEP. It doesn't matter how few employees you have or whether your business is structured as a sole proprietorship, partnership, corporation or nonprofit. Each year, you can decide how much to contribute on behalf of your employees, so you aren’t locked into making a contribution if your business has a bad year. Owners of the business are also considered employees and can make employee contributions to their own accounts.

Overall, the SEP plan is a better option for many small businesses because it allows for larger contributions and greater flexibility.

IRAs and Solo 401(k)s: If you’re in a competitive field and want to attract the best talent, you might need to offer a retirement plan, such as the two described above. However, employers are not required to offer retirement benefits to their employees. If you don't, one way you can save for your own retirement without involving your employees is through a Roth or traditional IRA, which anyone with employment income can contribute to.

You can also contribute to an IRA on your spouse’s behalf. Roth IRAs let you contribute after-tax dollars and take tax-free distributions in retirement; traditional IRAs let you contribute pretax dollars, but you’ll pay tax on the distributions. The most you can contribute to an IRA in 2022 is $6,500 or $7,000 if you’re 50 or older. These limits increase to $6,500 and $7,500 respectively for tax year 2023.

Finally, if your small business has no eligible employees other than your spouse, you can contribute to a Solo 401(k).

Develop an Exit Strategy for Your Business

It might seem strange that developing a business exit strategy should be one of your first considerations when planning for retirement. But consider this: the small business you spend your life building might become your largest asset. If you want it to fund your retirement – and to stop working – you’ll need to liquidate your investment. To prepare to sell your small business one day, it needs to be able to operate without you. It’s never too early to start thinking about how to accomplish that goal and about how to find the best buyer for your small business. 

Market conditions will affect your ability to sell your business. You might want to build flexibility into your retirement plan so you can sell your stake during a strong market or work longer if a recession hits. You definitely want to avoid a distress sale: One problem you’ll encounter if you wait until the last minute to exit your business is that your impending retirement will create the impression of a distress sale among potential buyers and you won’t be able to sell your company at a premium. 

Many small business owners say that they don't want to retire, or at least not retire fully. But even if you’re among the many small business owners who plan to keep working, establishing a retirement plan for your small business is a good idea because it gives you options—and having options means you’ll feel more satisfied with whatever path you choose. 

Internal Revenue Service. " 401(k) Limit Increases to $22,500 for 2023, IRA Limit Rises to $6,500 ."

Internal Revenue Service. " Retirement Topics - SIMPLE IRA Contribution Limits ."

Internal Revenue Service. " SIMPLE IRA Plan ."

Internal Revenue Service. " SEP Plan FAQs .”

Internal Revenue Service. " SEP Plan FAQs ."

Internal Revenue Service. “ SEP Plan Fix-It Guide - SEP Plan Overview .”

Internal Revenue Service. " Simplified Employee Pension Plan (SEP) .”

Internal Revenue Service. " Retirement Topics - IRA Contribution Limits ."

Internal Revenue Service. " One-Participant 401(k) Plans ."

Retirement Savings Accounts


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