With so many retirement account options available, choosing the right plan can feel overwhelming — but the payoff is well worth the effort. The right retirement plan doesn’t just help you save more and reduce your tax burden; it also strengthens your ability to attract and retain great employees by investing in their financial futures. Here’s a closer look at the options and what makes each one stand out.
SEP IRAs
SEP IRAs are a favorite among small business owners and self-employed individuals for good reason: they’re simple to administer and pack serious contribution power, allowing you to set aside up to 25% of compensation. These plans must be established and funded by your business’s tax return filing deadline, including extensions. The tax-deduction potential is strong, and they’re an effective vehicle for building long-term retirement savings. One important consideration — if you have employees, you’re required to contribute the same percentage for them as you contribute for yourself.
Solo 401(k)s
For self-employed individuals with no employees, the Solo 401(k) is hard to beat — especially in strong income years. Because the IRS allows you to contribute in two capacities — as both the employer and the employee — this structure can enable significantly higher contributions than most other plan types. The result? Larger tax deductions and faster-growing retirement savings. These plans must be established by December 31st.
Traditional 401(k) Plans
The traditional 401(k) remains one of the most widely used retirement plans in the country, and for good reason. Medium to larger companies gravitate toward it because it offers a level of structure, flexibility, and scalability that other plans simply can’t match. Like the Solo 401(k), these plans must be established by December 31st.
Defined Benefit Plans
Defined benefit plans are purpose-built for high-income business owners who have few employees — and they’re especially powerful for those who got a late start on retirement savings. Owners age 50 and older stand to benefit the most, since contributions are calculated based on age, income, and years remaining until retirement. The IRS permits substantially larger contributions under these plans than with defined contribution plans, opening the door to significant tax-deduction opportunities. These plans must be established by the time the business tax return is filed. While they do require actuarial calculations and carry more administrative overhead, the ability to build substantial retirement savings in a compressed timeframe makes them a compelling option.
Profit-Sharing Plans
If your business income varies year to year, a profit-sharing plan offers something most other retirement vehicles don’t: flexibility. Unlike defined benefit plans, which are best suited for steady and predictable income, profit-sharing plans let you decide how much to contribute each year. That means you can maximize contributions during strong years and pull back when cash flow is tighter — keeping your retirement funding aligned with your business performance. These plans also offer extra setup time, with an establishment deadline tied to your company’s tax filing deadline, including extensions.
SIMPLE IRAs
SIMPLE IRAs strike an appealing balance for business owners who want to participate in a retirement plan themselves while extending the same benefit to their employees. The IRS designed these plans with simplicity in mind — administration is far more straightforward than a traditional 401(k), saving you both time and cost. These plans must be established by October 1st.
Saving for the future is essential — the best time to start was yesterday, but the next best time is today. Your upcoming tax appointment is the perfect time to explore which plan makes the most sense for you and your team. We’re also happy to collaborate alongside your certified financial planner to ensure your retirement strategy aligns with your broader financial goals. Let’s make the most of the conversation — bring your questions, and we’ll help you find the right fit.