If you’re running a small business, there’s a good chance you barely have time to think about next week—let alone retirement. Still, setting up some sort of retirement plan for yourself (and maybe for your team) can make a real difference years down the road. Let’s break down what’s out there and why it matters, step by step.
Why Retirement Planning Really Matters
Most small business owners spend years building something for themselves and their families. But without a real plan for retirement, a lot of folks end up worried about cash flow later. Social Security helps, but anyone who’s looked at those numbers knows it’s rarely enough for a comfortable living.
Having a solid retirement plan gives you a backstop. It’s not just about enjoying your golden years—it’s about having options. And if you have employees, a good plan can help with hiring and keeping good people.
Why Small Businesses Should Offer Retirement Plans
A retirement plan isn’t just an extra perk. It can be a difference-maker when you’re competing with bigger companies for talent. People want to work somewhere they feel secure, and retirement benefits help with that.
There’s plenty in it for owners, too. Contributing to your own retirement plan lowers your taxable income, which can mean owing less come tax time. Setting money aside now can mean way less stress later.
Retirement Plan Options (An Overview)
There’s no single right answer—just options that fit different business styles, sizes, and staffing needs. 401(k)s, SEP and SIMPLE IRAs, Solo 401(k)s, and even old-school pension-style plans are all on the table.
Some are easy to set up and run solo, while others shine if you’re running a business with a handful (or more) of employees.
Traditional 401(k): The Familiar Choice
You’ve probably heard of 401(k) plans—they’re everywhere at bigger companies. But small businesses can use them, too. With a traditional 401(k), both the boss and employees can put in money right from their pay.
The contribution limit is pretty high compared to other plans. In 2024, for instance, you can put in up to $23,000 if you’re under 50, and a little more if you’re older. Employers can match contributions if they want.
The flip side? There’s paperwork. And you’ll need to file an annual form with the IRS. But if you’re growing and want a plan that scales, this one can handle both you and your team as you expand.
SIMPLE IRA: Less Fuss for Smaller Teams
If you want something that’s easier to run, there are SIMPLE IRAs. “SIMPLE” stands for “Savings Incentive Match Plan for Employees,” though, truth be told, the setup is simpler than the name. These plans work well for businesses with 100 or fewer workers.
You can stash away up to $16,000 (as of 2024) per year if you’re under 50. Employers match employees’ contributions up to 3%, or make a flat 2% contribution across the board. There isn’t a ton of paperwork, and you don’t have to file that IRS annual form.
Cost-wise, it’s usually cheap to start and run—which is a big plus for businesses that just don’t have a massive HR budget. And if you’re comparing to the 401(k)? Well, there’s less flexibility, but a lot less hassle.
SEP IRA: For the Self-Employed or Small Crews
The SEP IRA (Simplified Employee Pension) is a favorite among freelancers, sole proprietors, and businesses with just a handful of workers. With a SEP, only the employer puts in money—employees don’t contribute.
You can contribute up to 25% of compensation for each employee, with a max of $69,000 in 2024. If you’re a one-person shop or the boss, you get to save a boatload and lower your taxable income at the same time.
The plan is super easy to set up at just about any bank or brokerage, and there’s almost no administration needed. But just know, if you have employees, the same percentage has to go into each person’s account as you put into your own.
Solo 401(k): For the Owner-Operator
If your business is just you—or you and your spouse—a Solo 401(k) could be your best option. You get to play both the role of boss and worker, which means you can put more away. There’s also a “catch-up” amount if you’re 50 or older.
In 2024, you could get up to $69,000 in there, or more if you’re making catch-up contributions. It’s really flexible—you can go heavy one year and scale back the next, depending on how your business did.
There’s some paperwork once your account grows, but nothing too scary. It also opens the door to Roth 401(k) contributions, which means your money can grow tax-free for retirement.
Defined Benefit Plans: The Classic Pension Style
A defined benefit plan, or pension, is a throwback. With this, the employer commits to paying you (and staff, if you have them) a set amount every year in retirement.
These plans are powerful if you’re earning a lot and want to put away a much bigger chunk of cash each year. They’re also pricier, and the paperwork gets more complicated since you’ll need an actuary to figure out how much to fund.
Small law firms, doctors’ offices, and older business owners wanting to turbocharge their retirement savings often look at these. Not for everyone, but great for the right fit.
How Do You Choose? Think About What Matters Most
So how do you actually pick a plan? Start by looking at your budget, how many people you employ, and your long-term business goals.
If you want maximum simplicity and you’re running solo, a SEP IRA or Solo 401(k) is hard to beat. If you want to stand out as an employer, consider a 401(k) or SIMPLE IRA.
Tax implications are different for each. For example, with Roth options, you pay taxes now and withdraw tax-free later. Traditional plans give you a deduction now, but you pay taxes on withdrawals in retirement. Knowing what fits your own financial plan is key.
Getting Started: Setting Up and Running Your Plan
Setting up a retirement plan today is more straightforward than ever. Many banks, brokerages, and online payroll services offer plans you can launch with just a bit of info.
You’ll generally need some basic paperwork. Often, this is just your business info and a plan document, which the provider helps you with. SEP and SIMPLE IRAs are famously easy. 401(k)s and defined benefit plans usually take more setup time.
After that, it’s about making sure you set aside money consistently and keep records up to date. If you have employees, let them know about their options. Regular reminders can help everyone actually use the benefit.
Staying Compliant — What Business Owners Need to Know
Compliance isn’t everyone’s favorite word. But the good news is, for most small business plans, staying on the right side of the rules is pretty manageable.
You’ll want to make sure contributions are made on time and that you’re treating employees fairly if they’re included. SEP and SIMPLE IRA plans have minimal reporting rules. 401(k) and defined benefit plans involve some annual forms.
If the details start to feel overwhelming, find a provider or advisor who works with small businesses. They can help you stay compliant, avoid penalties, and keep things running smoothly. If you’re curious, resources like websiteinfonow.com have straightforward info and tips for entrepreneurs looking to get started.
The Bottom Line: Start Small, But Start Soon
You don’t need a huge business or mountains of cash to set up a retirement plan. Even a basic account can make a massive difference over 10 or 20 years.
Maybe you’re a one-person shop looking to stash away more than just what Social Security provides. Maybe you’ve built a small team and want to offer something extra to keep them around. Whatever the setup, there’s a plan that fits.
The main thing? Don’t put this off because it feels complicated. Plenty of business owners wish they’d started sooner. Even if you begin small, you’ll be better set up for the future—whenever that comes.
So take a little time, run the numbers, and see what plan matches your needs. Your future self (and maybe your team) will thank you.