As a Small Business Owner, What Are Your Retirement Planning Options?


There are two sides to being a business owner.

Having your own business grants you more freedom, but it also means taking on a great deal of responsibility. You have to worry about things you need not think about as an employee. While you still have to plan for your retirement if you are an employee, the employer may take on some of the burden.

As a small business owner, you may be responsible for your own retirement planning and that of your employees. That can be a lot to think about.

Your Options

As a business owner, there are several options available for you to help fund your retirement. We have listed here some of them.


  • SIMPLE IRA

One of the available options for small businesses with 100 or fewer employees is the SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees Individual Retirement Account. Under this plan, an employee or a business owner can contribute to the plan before their income is taxed.

The contributions to the SIMPLE IRA is not going to be taxed, but any distribution from it will be. As an employer, you will be required to contribute each year by matching contribution up to 3% of compensation (not limited by the annual compensation limit), or 2% nonelective contribution for each eligible employee. Under the "nonelective" contribution formula, even if an eligible employee doesn't contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation up to the annual limit of $280,000 for 2019 (subject to cost-of-living adjustments in later years).

Employees may elect to contribute and is always 100% vested in (or, has ownership of) all SIMPLE IRA money.

The advantage of the SIMPLE IRA is that compared with other plans, it is easy to run and administer. Click here to talk to an advisor about setting up a SIMPLE IRA today!


  • SEP IRA

Now many business owners prefer the Simplified Employee Pension (SEP) as a retirement plan. Under this kind of plan, employer contributions cannot exceed the lesser of $56,000 for 2019 ($55,000 for 2018 and subject to annual cost-of-living adjustments for later years) or 25% of their income pretax.

Under SEP, an employer can make contributions that are tax deductible for the amount contributed. There is also no need for employees to pay taxes on the amount contributed by their employers, that is, until they retire and take distributions.

One of the things about SEP is that it can be established by sole proprietorship, partnership, and corporations. There are few restrictions regarding it. Not all businesses can use SEP IRAs.

Another important thing about SEP is that you can decide on how much to contribute without being obligated to pay specific amounts. But the best thing about SEP is that you can be considered as an employee yourself, and you can make contribution to your account just like with other employees. Click here to talk to an advisor about setting up a SEP IRA!


  • Traditional Retirement Plans

You can also save for the time you will be retiring without having to involve an employee, and that is through a traditional IRA or a Roth IRA. If you are married, you can also contribute on behalf of your spouse. You can contribute to a Solo 401(k) as well.


  • Selling Your Business

Part of planning for your retirement is to think about selling your business.

It may be difficult to think about selling a business you have worked so hard to build, but if you want to have money for your retirement, that might be the only viable option for you.

If you are thinking of using the sale of your business as a part of your retirement plan, a business valuation* could help you figure out if you are ahead, behind, or on track to meet your retirement goals. Click here to get in touch with a financial professional who can help you with understanding the value of your business.

Regardless of how you want to structure your retirement savings plan, assistance from a licensed advisor can help the process in many different ways. Advisors with the Piedmont Group are here to help you accomplish your retirement goals!


* The Piedmont Group does not provide qualified business valuations. For a qualified or certified business valuation, consult a properly credentialed appraiser.