Small Business Retirement Plans

Learn more about Small Business Retirement Plans. Includes information and frequently asked questions.

6 min read • Last updated on December 11th, 2018

Small business retirement plans help business owners to save for retirement either for themselves, their employees, or both. There are several retirement plans for small business owners with employees and those who are self-employed.

Below, we compare retirement plans for small business owners to help you select the best retirement option.

Small Business Retirement Plan Options:

1. Simplified Employee Pension Plan (SEP IRA).

A SEP IRA, also known as a small business IRA, is ideal for self-employed individuals or small-business owners with one or more employees. The employer funds all employee contributions which are tax deductible as a business expense.

2. Savings Incentive Match Plan for Employees (SIMPLE IRA).

A SIMPLE IRA is for businesses with 100 employees or less and is funded by tax-deductible contributions made by the employer and elective employee contributions. The employer generally matches up to 3.00% of employee compensation.

3. Traditional 401(k) Plan.

Under a Traditional 401(k) plan, employees are able to make pre-tax contributions and will only pay tax when they withdraw their savings.

4. Solo 401(k) Plan.

A Solo 401(k) plan is for self-employed individuals with no full-time employees. This retirement plan is tax-deferred and is ideal for those who want to invest in alternative assets.

Small Business Retirement Plans Comparison Chart:

SEP IRA

SIMPLE IRA

Traditional 401(k) Plan

Solo 401(k) Plan

Easy to set-up

Easy to set-up

Wide range of investment options

Wide range of investment options

No set-up fee; $10 - $50 annual maintenance fee

No set-up fee; $10 - $25 annual maintenance fee

Fees vary by plan

Fees vary by plan

Funded by employer contributions only

Funded by employee and employer contributions

Funded by employee and employer contributions

Funded by employee and employer contributions

Limit: Up to 25% of compensation, or $55,000 in 2018 ($56,000 for 2019)

Limit: Employee contributions cannot exceed $13,000

Match employee contributions up to 3.00% of compensation

Limit: Up to 25% of compensation, or $55,000 in 2018 ($56,000 for 2019)

Withdraw at any time; may be subject to 10% penalty fee if you are under 59.5 years old

Withdraw at any time; may be subject to 10% - 25% penalty fee if you are under 59.5 years old

Withdraw at any time; may be subject to 10% penalty fee if you are under 59.5 years old

Withdraw after a trigger event i.e. turning 59.5, disability, or termination of employment

Small Business Retirement Plans
Best Retirement Plans for Small Business:
  • ADP small business retirement plans.
  • Charles Schwab small business retirement plans.
  • Employee Fiduciary small business retirement plans.
  • Fidelity Small Business retirement plans.
  • T. Rowe Price Small Business retirement plans.
  • Vanguard small business retirement plans.
  • Paychex small business retirement plans.
Small Business Retirement Plans
How to Set Up a Retirement Plan for Small Business:
  1. Review your options with a tax adviser.
  2. File the Application for Determination for Employee Benefit Plan (IRS Form 5300).
  3. Consider outsourcing your benefits administration to a plan administrator.
  4. If you have employees, notify them of the terms of eligibility.
  5. File Forms 8880 and 8881, along with Form 5500.

Small Business Retirement Plans FAQs:

Why choose a small business retirement plan?

Running a business can be challenging and more often than not, business owners don't stop to think about their future and what they're going to do once they reach retirement age. Among all the admin and planning that goes into running a business, consider signing up for a small business retirement plan for yourself and your family. If you have a complement of staff, having a good retirement plan will help you to attract top talent and retain those employees, proving that you care not only about your own wellbeing but theirs too.

What is the best retirement plan for small business owners with employees?

The most common retirement plans for small business owners with employees are the SEP IRA and SIMPLE IRA. These plans do not have the same start-up costs and fees as conventional retirement plans. With the SIMPLE IRA, employers are required to match their employees' contributions up to 3.00% or 2.00% for a non-elective contribution per employee, up to $280,000.00 for 2019.

What is the best retirement plan for small business?

Finding the best retirement plan for self-employed individuals without employees depends on your needs. Each of the retirement plans above allows for greater flexibility when it comes to contributing toward and investing your funds. When you search for a retirement plan, be sure to read the employer guide from various retirement account companies and fill out the small business retirement plan questionnaire to help you make a decision.

What is the best retirement plan for self-employed individuals without employees?

Consider opening a 401(k) plan. Setting up a 401k for a small business is easy to do, and most providers offer low-cost pricing. Popular small business 401k options include Traditional 401(k) and Solo 401(k) plans.

Small Business Retirement Plans
What is the best 401(k) plan for small business?
  • Charles Schwab.
  • Vanguard.
  • Paychex.
  • Employee Fiduciary.
  • Fidelity small business 401k.
  • ADP.
  • T. Rowe Price.