Retirement for Business Owners – Retirement Plans for Self-Employed and Business Owners

Being a business owner provides a certain measure of freedom that simply cannot be compared. However, it is easy to forget about saving for retirement. Unlike employees who have access to a 401(k), those who are self-employed or business owners need to create their own retirement plans.

Before we look at the different retirement plans for self-employed and business owners, it is important that you figure out how much you would have to save for retirement. Then, you will need to consider the following retirement plans to find out what works best for you.

Traditional or Roth IRA

If you are just starting out and have recently left a job to launch a business, you can convert your old 401(k) into an IRA. Generally, it has a contribution limit of $6,000. However, if you are 50 years of age or older, you would have to contribute $7,000. A great thing about the option is that it offers tax deductions on contributions in the case of a traditional IRA. However, there would be no immediate deduction for Roth IRA. As for the withdrawals, they would be tax-free when you retire. As these are individual plans, you do not have to think about your employees. An IRA is the easiest way to start saving for retirement. Besides, there are no difficult filing requirements that you need to worry about.

Solo 401(k)

If you do not have any employees, you should also consider a solo 401(k). Its contribution limit is $61,000 plus a catch-up contribution of 100% of your earned income or $6,500, whichever is less. It treats you like two people, an employer, and an employee. When we look at the tax advantage of this retirement plan, it works just like a standard 401(k) offered by an employer. You make contributions before tax and distributions are taxed after reaching 59.5 years of age. If you have employees, you cannot contribute to this plan. But, you have the option to employ your spouse to get them to contribute to the plan as well. Your spouse would contribute up to the standard 401(k) contribution limit. Anyone who wants to save a huge amount of money for retirement or those wanting to save a ton of money within a few years will find it to be a great option.


If you do not have any employees or only employ a few people, you can also opt for a SEP IRA. It has a contribution limit of $61,000 or up to 25% of compensation, whichever is less. You should be able to deduct the contributions from your tax return. However, the distributions which you will receive when you retire will be taxed as income. As there is a low administrative burden, a SEP IRA is very easy to sign up for.

Speak with an Accountant for the Best Retirement Plan

When it comes to a retirement plan, we advise our valued clients to speak to our highly qualified accountants to ensure that they sign up for the best retirement plan.