Retirement Planning For Small Business Owners

The SEP offers a simple, straightforward way to contribute toward your own and your employees’ retirement without introducing numerous administrative costs.

You’ll have to put together a formal written agreement, and you’ll need to provide benefits to all eligible employees, but you won’t need to file an annual Form 5500 with the IRS.

The classic situation for this plan is when you have a small business whose multiple owners take home similar earnings but are of different ages.

The plan must be tested to meet Internal Revenue Code nondiscrimination requirements, of course.

If your operation is fairly small and likely to stay that way, the simplified employee pension plan (SEP-IRA) may be right for you.

I had the 401k and could also do a Traditional or Roth IRA outside of it.

Additionally, solo 401(k) plans allow you to make tax-deductible profit-sharing contributions equal to 25% of your compensation (corporate entity) or 20% of self-employment income (sole proprietor). These plans do require a TPA (third-party administrator).

Ultimately, the Solo 401(k) will allow me to contribute the most pre-tax, but my income has to get me there first 🙂 Here’s one way to compete with larger companies for prime employees.

This is currently what I have and should satisfy me for a few more years. A business owner may establish one and include their spouse in the plan, provided the spouse is an employee of the business.

I even opened up two separate accounts so I could invest with Betterment and another where I control my own investments. A solo 401(k) throws in a profit-sharing twist on the standard 401(k).

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