Retirement Plans for Business Owners

Planning for retirement is crucial for business owners who want to secure their financial future while maximizing tax advantages. Whether you’re self-employed or managing a growing team, the right retirement plan can provide both savings and tax benefits. This guide explores retirement plans for business owners and key features to help you choose the best fit.

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December 17, 2024

Retirement Plans for Business Owners Starting Out

Traditional IRA

2024 Contribution Limit: $7,000 (or $8,000 if 50 or older).
Contributions are tax-deductible, but limits apply if you have another retirement plan at work.
Distributions are taxable, and required minimum distributions (RMDs) must begin by age 73.

Roth IRA

2024 Contribution Limit: $7,000 (or $8,000 if 50 or older).
Contributions are not tax-deductible, but qualified distributions are tax-free.
No RMDs are required, making Roth IRAs ideal for tax-free growth.

Learn more about traditional and Roth IRAs

Best Retirement Plan for Self-Employed or Small Business Owners Without Employees

Solo 401k

2024 Contribution Limit: $69,000 ($76,500 if 50 or older).
Includes contributions as both “employee” and “employer.”
- Employee: Up to $23,000 ($30,500 if 50 or older).
- Employer: Up to 25% of net self-employment income.
Allows both traditional (tax-deductible contributions) and Roth (tax-free distributions) options.

Key Rule: No employees other than a spouse can participate in the plan.

Retirement Plans for Small Businesses With Few Employees

SEP IRA

2024 Contribution Limit: The lesser of $69,000 or 25% of compensation.
Employers must contribute equally for themselves and their employees.
No employee contributions.
Roth SEP IRA is an available option due to SECURE Act 2.0 updates.

Best for Large Businesses (100 or Fewer Employees)

SIMPLE IRA

2024 Contribution Limit: $16,000 ($19,500 if 50 or older).
Employers can contribute either:
- up to 3% matching contributions of employee compensation, or
- 2% non-elective contributions of each employee’s compensation.
Traditional SIMPLE IRA distributions are generally taxable.

Choose the Right Plan for Your Business

Selecting the right retirement plan can help business owners build wealth, retain employees, and save on taxes. With expanded options like Roth contributions for SEP and SIMPLE IRAs, there’s a plan to suit every business structure. Need personalized advice? Contact DuPage Tax Solutions for a free consultation and secure your financial future today!

References

Retirement Plans for Self-Employed People | Internal Revenue Service. https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people