Retirement Options for Small Business Owners

Retirement Options for Small Business Owners

Date: May 02, 2021,

If you are a small business owner, then how you manage your finances as a self-employed business owner (sole proprietor or partner) will look entirely different from the financial management options that may be available to you if you were an employee. For example, you’ll have to pay self-employment taxes, purchase your own healthcare, and save for retirement without an employer’s contributions. As such, as you think about your financial future, it’s important to know what retirement planning options exist for small business owners. At Harvest Financial Planning, LLC, we offer financial planning advice for small business owners like you. Here’s a snapshot of what you should know about your retirement options as a small business owner, both for planning for your own retirement and supporting your employees’ retirement plans–

Simple IRA

If you have employees, then setting up a simple IRA may be a great choice, in large part because these account types are no misnomer–they’re simple. These types of plans are available for small businesses with fewer than 100 employees. Employers will match up to three percent of an employee’s contributions, or two percent of an employee’s annual salary. Contributions made by an employer are tax-deductible. 


SEP stands for simplified employee pension and is a great option for small business owners who want to contribute toward their own retirement savings and their employees’ retirement. A SEP IRA account follows the same rules related to investment and distribution as does a traditional IRA account. One of the benefits of a SEP is that it allows a person to make contributions of up to 25 percent of their income or $58,000, whichever is less. Some of the benefits of a SEP account are that it is easy to set up, has low administrative costs, and maintains flexible annual contribution requirements. 

401(K) or IRA

Providing for an employee’s retirement is a great option for businesses that want to show that they value their employees, as well as those who work in competitive industries and want to attract the best employees out there. With that in mind, small business owners don’t have to contribute to an employee’s retirement, and may choose to open an IRA or Roth IRA for solo saving. For employers that don’t have any eligible employees, another option is opening a solo 401(k). Keep in mind that the contribution limit for an IRA is much less than it is for a SEP account. 

Learn More About Retirement Options for Small Business Owners

If you are a small business owner and you’re exploring ways to save for your own retirement, provide for your employees’ retirement, or both, call Harvest Financial Planning, LLC to meet with one of our small business financial advisors at your convenience. We are here to answer your questions and help you to design a strategy that works.

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