You asked for a 2023 quick reference guide to retirement planning for the small business owner — so here you go. Some plan options for small entities and the self-employed include SEP-IRAs, SIMPLE IRA plans, SIMPLE 401(k) plans, and individual 401(k) plans. Each plan has specific features, requirements, and contribution limits that should be considered when choosing the right plan for your business.
- SEP-IRAs (Simplified Employee Pension)
- Ideal for small businesses and self-employed individuals
- Employer-funded, with flexible annual contribution limits
- Contributions are tax-deductible for employers
- Easy to set up and maintain, with low administrative costs
- Employees are immediately 100% vested in their accounts
2. SIMPLE IRA Plans (Savings Incentive Match Plan for Employees)
- Designed for small businesses with 100 or fewer employees
- Both employers and employees can contribute
- Employers must choose between matching contributions or making non-elective contributions
- Mandatory annual contribution requirements for employers
- Lower contribution limits compared to other retirement plans
3. SIMPLE 401(k) Plans
- Similar to SIMPLE IRA plans but with 401(k) features
- Designed for small businesses with 100 or fewer employees
- Both employers and employees can contribute
- Employers must choose between matching contributions or making non-elective contributions
- Allows for loans and hardship withdrawals
4. Individual 401(k) Plans (Solo 401(k))
- Suitable for self-employed individuals and owner-only businesses
- Both employers and employees (in the case of owner-only businesses, the owner and their spouse) can contribute
- Higher contribution limits compared to SEP-IRAs and SIMPLE IRAs
- Allows for loans and hardship withdrawals
- More complex administration compared to SEP-IRAs and SIMPLE IRAs
