What do you do if you're a small business owner trying to choose a retirement savings plan?

Sadly small business owners only explore traditional options and are unaware that as a small business owner they may be entitled to creating their own personal private plan, which will not only allow them to contriute larger amount of cash but also offer additional benefits that will protect them and their business in the future. If you are not have the four pillar professionals on your team; CPA, Tax Attorney, Estate Planning Attorney and a Life and Health Insurance agent all working together to bring you the most innovative and comprehensive options then you are most likely not leveraging all of the tax codes that are available to self employed and small business owners.

The Simplified Employee Pension (SEP) IRA is a good choice if you want to save for retirement but don’t want the headache of administering it. It can also cover employees. These plans are completely employer-funded, and employees make no contributions.

The (SIMPLE) IRA allows your small business to create an IRA for your employees. You, as the employer, also contribute to the account. You can match employee contributions up to 3% of their compensation, or contribute 2% of their compensation.

SIMPLE IRAs are phenomenal options for small businesses with small teams. While it cannot be combined with another workplace retirement plan, it is a great alternative to the 401k for those businesses that don't want to pay the administration costs of a 401k and still offer an employer match. The matching component is also not as expensive as most business owners think. If an employee contributes the max of $16,000 (2024 limit), that's only $480 (A lot of business owners think it's thousands per employee). Also, with the passing of the SECURE Act 2.0, business owners are now able to create a Roth option in their SIMPLE IRA.

If you're self-employed or a business owner with no employee other than your spouse and you want to maximize your contributions, try a self-employed 401(k). This plan offers the biggest possible contribution among these retirement plans because it recognizes that you are both employer and employee.

Keep in mind that with the solo-401k there's the flexibility to also add a Roth component. This affords you the ability, without regard to income, to contribute significantly more than the Roth IRA limits.

A Roth IRA can be used to supplement retirement savings, Contributions are made from after-tax income, so funds within the account grow tax free. Distributions are also tax-free. The main downside is that it's limited based on your income and not accessible to you if you're a high earner.