Choosing a Retirement Plan for Your Small Business

Posted on:  August 14th, 2015
By:  Diane Morrison

According to a recent article in the Bloomberg News, the Social Security retirement and disability (combined) fund reserves will run out in 2034. Well… regardless of that possibility, the income any taxpayer will receive from Social Security is seldom enough for a comfortable retirement. Savvy taxpayers know this and have been wisely contributing maximum amounts to their company 401k and/or to their individual IRA accounts. But if you are the owner of a small business, you’ve got some additional matters to consider.

For a small business owner, setting up an account for retirement savings can offer significant tax benefits for yourself and your business. In addition, there are also options for offering your employees a way to save. Here is an overview.

  • SEP IRA – allows you, the employer, to maximize your contributions, as the yearly limit is high – up to 25% of total income. Keep in mind that these plans are funded entirely by employer contributions, so no additional employee amounts are allowed. This is a good choice for owner-only businesses that want to make substantial contributions to their own accounts.
  • SIMPLE IRA – allows employees to contribute up to $12,500 (or $15,500 if over age 50). Employers can then make matching contributions up to a point, or contribute a set percentage (up to 2%). This can be a good choice for lower income business owners who want to put away more than 25%, as you can contribute up to 100% of your compensation as long as you stay under the limit.
  • 401(k) – is another option with a higher yearly limit. As opposed to a SEP IRA, however, it allows for employee contributions. These plans allow for the greatest flexibility in plan design – employer contributions, vesting schedules or Roth options are all possibilities that can be included.
  • MyRA – is a new option available through the Department of the Treasury. It is a good option for smaller businesses to make it easy for their employees to save for retirement without any cost to the business or for those employees not eligible for their company 401(k). Contributions are entirely employee funded. See for more details.


As always, we suggest you consult with us to determine the best choice for you and your business.


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