retirement accounts for business owners

Written By Mason Stockham

Retirement Accounts for Business Owners and Entrepreneurs

Planning for retirement as a business owner or entrepreneur requires a different approach than traditional employees who have access to employer-sponsored retirement plans. Fortunately, there are several retirement account options designed specifically for self-employed individuals and small business owners. Each option has tailored benefits, contribution limits, and tax implications. Below, we explore the best retirement accounts available to business owners and entrepreneurs.

1. SEP IRA (Simplified Employee Pension IRA)

A SEP IRA is a tax-advantaged retirement plan that allows business owners to contribute a percentage of their income toward retirement.

  • Who It’s Ideal For: Self-employed individuals and small business owners with few or no employees.

  • Contribution Limits (2025): Up to 25% of compensation or $70,000, whichever is lower.

  • Tax Benefits: Contributions are tax-deductible, and investments grow tax deferred.

  • Key Considerations: If you have employees, you must contribute the same percentage for them as you do for yourself.

2. Solo 401(k)

A Solo 401(k) is designed for self-employed individuals and business owners with no full-time employees (other than a spouse). It allows higher contribution limits compared to a SEP IRA.

  • Who It’s Ideal For: Business owners with no employees who want flexibility in contributions.

  • Contribution Limits (2025): Up to $23,500 as an employee contribution, plus up to 25% of compensation as an employer contribution.

  • Tax Benefits: Can be set up as a traditional (tax-deferred) or Roth (tax-free growth) account.

  • Key Considerations: More paperwork than a SEP IRA, but offers greater flexibility.

3. SIMPLE IRA (Savings Incentive Match Plan for Employees IRA)

A SIMPLE IRA is a retirement plan for small businesses with 100 or fewer employees. It offers lower contribution limits but requires employer contributions.

  • Who It’s Ideal For: Small business owners with employees who want a simple, low-cost retirement plan.

  • Contribution Limits (2024): Employees can contribute up to $16,500 ($20,000 if age 50+); employers must match up to 3% of salary or contribute a fixed 2%.

  • Tax Benefits: Employer contributions are tax-deductible, and employee contributions grow tax deferred.

  • Key Considerations: Mandatory employer contributions can be a downside for some businesses.

4. Defined Benefit Plan (Cash Balance Pension Plan)

A Defined Benefit Plan functions like a traditional pension, offering business owners the ability to save much more for retirement compared to other plans.

  • Who It’s Ideal For: High-income business owners looking to maximize tax-deferred contributions.

  • Contribution Limits: Varies based on actuarial calculations but can exceed $300,000 per year.

  • Tax Benefits: Contributions are tax-deductible, and funds grow tax deferred.

  • Key Considerations: Requires actuarial services and has higher administrative costs.

Choosing the Right Plan

The ideal retirement plan depends on your business structure, income, and whether you have employees. Business owners seeking high contribution limits may prefer a Solo 401(k) or Defined Benefit Plan, while those with employees might find a SEP or SIMPLE IRA more suitable.

 

Disclosure:
Advisory services are offered through Meridian Wealth Management, LLC, a Registered Investment Advisor. Meridian Wealth Management LLC does not provide tax or legal advice. The opinions and views expressed here are for informational purposes only. Please consult with your tax and/or legal advisor for such guidance.

MLA Citations

 

Mason Stockham
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