Retirement Options for Small Business Owners : TSG Financial Strategies, LLC

Retirement Options for Small Business Owners

Having the right retirement plan as a small business owner is crucial for several reasons. First, knowing your financial future is secure will allow you to focus more freely on your business. Second, offering an attractive retirement plan to your employees will not only help you hire the right people for your team, but also help to keep them.


There are a lot of factors to consider for small businesses when thinking about retirement options. Here are several of them:


  1. SEP IRA

Otherwise known as the simplified employee pension (SEP) plan, the SEP IRA is an employer-sponsored retirement arrangement for companies with one or more employees. The employer makes contributions and are made to an account established for each eligible employee. 



Designed for businesses with 100 or fewer employees, this can be a cost-effective way to contribute to both your and your employees’ retirement. 


  1. Small business 401(k)

What many don’t realize is that a 401(k) plan can be established and maintained by most companies, including for-profit and nonprofit corps. These plans can afford employees and owners higher contribution limits, as well as ways to allow a company to share profits the business has with its employees without triggering additional taxes.


  1. The Traditional IRA

For sole proprietors, or any business owner who is not offering another retirement plan to its employees, traditional IRAs are one of the simplest ways to save money for retirement. Something to note is that contributions to a traditional IRA can be tax deductible depending on your modified adjusted gross income, federal tax filing status, and other variables.  It’s important to seek guidance from your CPA to see if you can deduct the contributions.


  1. The Roth IRA

This is another type of plan for sole proprietors and business owners.  Unlike the traditional IRA, contributions to a Roth IRA are not deductible, but money can be withdrawn tax free so long as you’ve held the account for the longer of 5 years or to age 59.  This can be a good hedge if you feel tax rates are going to be higher in the future; pay the tax today and withdraw the money tax free in the future.


  1. The individual 401(k) plan

If it’s just you (even you and your spouse), this could help you save even more than a SEP IRA could as a sole proprietor. This is because in the individual 401(k), you’re able to contribute as both an employee and through your business. 


Start taking steps today to ensure you’re getting your business set up for success. Schedule a consultation call today.