Retirement Planning for Business Owners
Why your business should not be your only retirement plan, and how Solo 401(k)s, SEPs, SIMPLEs, and pension-style plans let you save far more than an IRA.
Ask many owners about their retirement plan and you will hear some version of "the business is my retirement." It is an understandable bet. You have poured everything into it, and it might sell for a lot one day.
But a business is a concentrated, illiquid asset. Its value depends on your industry, the economy, and whether a buyer can run it without you. Saving steadily outside the business gives you a second leg to stand on, and it cuts your taxes while you do it.
Do not bet everything on selling
Many owners who hope to sell never find a buyer at the price they need, or they sell for less after a health problem or industry shift forces their hand. Treat a sale as a bonus, not the whole plan. See Planning Your Exit.
The main plans for owners
A Solo 401(k) is for owners with no employees other than a spouse. You contribute twice: as the employee, up to $24,500 in 2026 (plus $8,000 if you are 50 or older, or $11,250 if you are 60 to 63), and as the employer, up to 25% of compensation (about 20% of net self-employment earnings for sole proprietors). Total additions cap at $72,000, not counting catch-ups.
A SEP IRA is the simplest to open. Only the employer contributes, up to 25% of compensation (about 20% of net self-employment earnings), capped at $72,000. The catch: if you have eligible employees, you must contribute the same percentage of pay for them.
A SIMPLE IRA fits businesses with employees that want a low-cost plan. Employees, including you, can defer up to $17,000 in 2026 (plus a $4,000 catch-up at 50 and older), and the employer makes a modest required match or contribution. Learn more in Retirement Plans for Your Team.
| Plan | Best for | Max in 2026 | Roth option |
|---|---|---|---|
| Solo 401(k) | Owner only (plus spouse) | $72,000 + catch-up | Yes, often |
| SEP IRA | Simple setup, few or no staff | $72,000 | Possible, check provider |
| SIMPLE IRA | Small teams | $17,000 deferral + match | Possible, check provider |
| Defined benefit | High, steady earners | Funds a benefit up to $290,000/yr | No |
Roth or traditional
With traditional contributions, you deduct them now and pay tax when you withdraw in retirement. With Roth contributions, you pay tax now and qualified withdrawals later are tax free. Recent law changes allow Roth options in more plan types, but not every provider offers them yet. If you expect a higher tax rate later, or you want tax-free income in retirement, Roth can make sense. A tax pro can help you split between the two.
Try it
Owner Retirement Plan Comparer
Estimate how much you could contribute to each plan based on your business structure and earnings.
Highest possible 2026 contribution
$46,804
with a Solo 401(k)
Employee deferral plus employer profit sharing. Owners and spouses only.
Employer contribution only. Simple to open; must cover eligible employees at the same %.
Lower limits, assumes a 3% match. Works for teams up to 100.
2026 limits: 401(k) deferral $24,500 (catch-up $8,000 at 50+, $11,250 at 60 to 63), SIMPLE $17,000 (catch-up $4,000 or $5,250), total additions $72,000, compensation counted up to $360,000. For the self-employed, contributions are based on profit minus half of self-employment tax (about $8,478 here). Plans with employees must cover them too. Estimates only; confirm with a tax professional.
Owner story
At 52, Tom assumed selling his company would fund retirement. A business broker told him the company was worth far less than he hoped because customers called Tom directly for everything. He opened a Solo 401(k) that year, now saves the maximum with catch-up contributions, and is training a service manager so the business is worth more when he does sell. Either way, he is no longer betting everything on one buyer.
Illustrative composite, not a real customer.
Retirement moves for owners
0/6 doneWords to know
- Solo 401(k)
- A 401(k) for owners with no employees besides a spouse, allowing both employee and employer contributions.
- SEP IRA
- An employer-funded IRA that is easy to set up and allows up to 25% of compensation.
- Cash balance plan
- A defined benefit plan that credits each participant with a growing hypothetical account balance.
- Catch-up contribution
- Extra amount savers age 50 and older can contribute on top of normal limits.
Finished reading?
Track your progress through Stage 6: Protect & Plan.
Related lessons
Retirement Plans for Your Team: SEP, SIMPLE, and 401(k)
Compare the three main plans, see the 2026 limits, and learn how tax credits can cover setup costs.
Tax Planning
You can legitimately reduce the tax you owe by planning ahead.
Evaluating Companies
How can you tell if a company has the potential to be a good investment?