5 Retirement Account Options for Small Business Owners

Linda Morrect

Retirement Account Options for Small Business Owners

As a small business owner, you have a lot on your plate.

From managing finances to maintaining customer service, your responsibilities are endless. Amongst all this, planning for your retirement might not be a priority. But it should be!

Retirement planning can seem overwhelming, but it doesn’t have to be. There are retirement account options designed for small business owners to make saving for retirement easy. Let’s explore these options in more detail.

1. Simplified Employee Pension (SEP) IRA

A SEP IRA is an easy and cost-effective way for small business owners to set up a retirement account. It’s easy to administer and only requires a signed agreement to establish.

Contributions to a SEP IRA are made by the employer only, and they are tax-deductible. SEP IRAs offer high contribution limits, allowing business owners to save up to 25% of their income or $58,000, whichever is less.

2. 401(k)

This plan allows employees to contribute a part of their pre-tax income towards their retirement savings, with the employer also having the option to make contributions. It is a valuable tool for small business owners as it not only helps employees save for their future but also provides tax benefits for both the employees and the employer.

Understanding the key concepts of a 401k plan, such as contribution limits, vesting schedules, and investment options, is crucial for maximizing its benefits. With the help of resources such as 401(k): Key Concepts Explained, small business owners can make informed decisions about offering a 401k plan to their employees and ensure a secure retirement for themselves and their employees.


The SIMPLE IRA is an affordable retirement plan that can be a great option for small businesses with fewer than 100 employees. The employer matches employee contributions up to 3% of their salary, and the plan allows contributions up to $13,500 a year. SIMPLE IRAs are easy to establish and have low administrative costs.

4. Defined Benefit Plan

A defined benefit plan works best for small business owners who want to contribute more to their retirement account than the limits of other plans. This plan promises an annual payout in retirement based on your salary history and years of service with your business.

It’s more complicated to set up than other plans and can have higher administrative fees, but it’s a great way to save if you plan on maxing out your contribution limits in other retirement plans.

5. Profit-Sharing Plan

A profit-sharing plan is a plan where you share the profits with your employees in the form of contributions to their retirement plan. It is a flexible plan with no fixed contributions and can help increase employee morale and retention by offering a valuable benefit.

One downside to this plan is that the contributions are not guaranteed since they are based on company profits.

Maximize Benefits for Entrepreneurs With Retirement Account Options

As a small business owner, retirement planning might not be a priority, but it should be. There are many retirement account options available that cater to small business owners. Each option has its benefits and limits, so it’s essential to have a clear understanding of which plan works best for you.

Financially secure future planning doesn’t have to be complicated. Take advantage of the available resources, and choose the option that aligns with your goals and objectives. The sooner you start planning, the better off you will be in the long run.

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