Small Business Owner Retirement Options

As a small business owner, you will be able to choose from a number of different retirement options for your company. Here are a few of the retirement account options that you have.


Although many small business owners believe that this type of account is reserved for large companies, this is not the case. Even if you have a small company, you might decide to get involved with a traditional 401k. Because there are many financial brokerages in the market, the fees for this type of account continue to go down. With this type of account, you can contribute more money to an employee's account than you could with other methods. You can contribute as much as 25 percent of an employee's salary to his or her account. This could be as much as $49,000 per employee. If you are interested in getting as big of a tax deduction as you can, this method might be preferred.

Simple 401k

Another option that you have is the simple 401k. This option provides you with a very similar type of account with an easier process to work with. In order to qualify for this type of account, you have to have fewer than 100 employees. This account will allow you to contribute only up to 3 percent of an employee's salary. However, the costs to administer this type of program are typically much less. There are no testing requirements in order to determine if the retirement account is top-heavy. If a traditional 401k is being used only by upper-level employees, it might lose its tax benefits. This kind of testing can get very expensive and involved. You can completely avoid this with the simple 401k. You will also not have to worry about doing as much paperwork with the simple version.


The SEP IRA is another option that you have in front of you. With this retirement option, you are completely responsible for how much money goes into your employees' accounts. Employees are not allowed to make contributions to this type of account. You also can choose whether you want to contribute during a given year. For example, if you have a rough year financially, you could choose to forgo contributions. However, whenever you do contribute, the percentages have to be equal for every employee in the company. If you want to contribute 25 percent of your salary to your retirement, you will have to contribute 25 percent worth of everyone's salary to their accounts.

Simple IRA

You might also consider looking at the simple IRA. With this type of account, employees can contribute up to $11,500 into their accounts. You then have two different options for contributing to employee accounts. You can do a discretionary dollar for dollar match up to 3 percent of an employee's salary. You could also choose to do a nondiscretionary match of 2 percent for every employee who has an account.

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