6 Great Retirement Plan Options For Small Business

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Retirement plans can range from very simple and easy to somewhat complicated. And retirement plans can be totally free to the employer or can range to a bit expensive. When it comes to expense, keep in mind that the plan can benefit you, the small business owner, as well as your employees. If it is a family business, the plan can benefit your family members too.

Should you Adopt a Retirement Plan?

The days of the old-fashioned pension are over. But should you adopt a retirement plan?. Some of the positives about adopting a small business retirement plan include:

  • Retirement plans are generally easy to set up (although as noted above, some can get a bit complicated.
  • Retirement plans can be set up to be totally free to the company. But, also as noted, there are some options that cost you money.
  • Your company-wide retirement plan provides a great way for you to manage your own retirement savings.
  • Some retirement plans have substantial tax advantages for both you and your employees.
  • A retirement plan helps you attract and retain great employees.

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What are my Retirement Plan Options?

Bear with us here, there are a number of plan options to explain, some a bit complicated. If any particular plan interests you, we can provide more details. If you already have a retirement plan then its time to revisit it. Here are your options, with the key features highlighted.


  • This is, by far, the simplest plan.
  • Zero cost to the employer.
  • The federal government provides all the materials you need.
  • The contribution limit is $5,500 per year ($6,500 per year for employees over the age of 50).
  • The money is invested in a ROTH IRA that is invested in government bonds.
  • The money will earn a bit under 2%.
  • The contribution is in after-tax money, but, as a result, any withdrawals are tax-free.


  • Simplified Employee Pension Plans require no government paperwork
  • Contributions are made by you, the employer.
  • You can’t play favorites, you must fund every employee’s plan (including your own).
  • The maximum contribution limit is complicated; think 25% of the employee’s net compensation.
  • The amount you contribute each year can vary depending on how well your small business is doing.
  • If you are a sole proprietor this is a great way to lower your taxes and create a nice retirement nest egg.

Reduce tax by maximizing tax credits and deductions. Learn how?

Simple IRA

  • Employers must contribute annually; employees can generally contribute up to $12,500 a year.
  • The employer can match each employee’s contribution one-for-one up to 3% of the employee’s compensation.
  • Alternatively, the employer can contribute up to 2% of the employee’s compensation and the employee doesn’t have to contribute anything.

Simple 401(k)

  • These plans are generally very similar to Simple IRAs.
  • The best benefit of the Simple 401(k), however, is that the employee can borrow against the money in the plan with no tax consequences.
  • Firms that administer these plans offer a wide variety of investment options, such as mutual funds. Mutual funds investments can make a lot of money, but can also lose money

Solo 401(k)

  • As the name suggests, this is a great option for solo practitioners.
  • For high-income individuals, contributions can be more than $50,000 a year (the exact maximum changes yearly)
  • Contributions are tax-deductible, allowing you to use the 401(k) to dramatically reduce your federal income tax
  • Firms that administer these plans offer a wide variety of investment options, such as mutual funds. Mutual funds investments can make a lot of money, but can also lose money
  • When you begin withdrawing money from the 401(k), mandatory starting at 70.5 years of age. You will be taxed on the money, but you will probably be in a lower tax bracket than you were in when the money was earned.

Defined Benefit Plans

  • This is the old-fashioned plan that allows the greatest contributions
  • These plans are best for very high income professions and businesses
  • These plans provide exceptional tax savings
  • Firms that administer these plans offer a wide variety of investment options, such as mutual funds. Mutual funds investments can make a lot of money, but can also lose money.
  • Administrative costs on these plans can be high

Save Taxes on the Sale of Small Business

As tax and accounting professionals, we can help you determine if a company-wide retirement plan is right and best for your small business or family business.

If you’d like to learn more about tax laws and your business, we at Akif CPA are here to help. Learn about our services here.

Do you have unique issues or concerns not discussed in this blog then please contact us by email or phone. We are here to help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Akif CPA will not be held liable for any problems that arise from the usage of the information provided on this page.

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