By: Jennifer Brazer
Jennifer is the author of From Cubicle to Cloud and Founder/CEO of Complete Controller, a pioneering financial services firm that helps entrepreneurs break free of traditional constraints and scale their businesses to new heights.
Fact Checked By: Brittany McMillen
4 Essential Retirement Plan Questions Every Small Business Owner Must Ask
I once worked with a bakery owner who assumed selling her business would fund her golden years. But when she finally got a professional valuation, she learned her ovens and equipment weren’t worth nearly what she thought—and she had no retirement plan to fall back on. That moment changed everything about her future security.
If you’re a small business owner, your retirement plan isn’t a distant “someday” problem—it’s your day-one survival strategy. Failing to ask the right questions will cost you money and potentially your future security.
Key Takeaways
- Your choice of retirement plan affects your tax strategy—match it to your team size and goals.
- Your business is a retirement asset—know its real value, timeline to sell, and how to optimize the transition.
- Tax benefits are powerful but risky; avoid penalties with smart systems and regular compliance checks.
- Retirement timelines need flexibility—adjust for life changes, market shifts, or unexpected exits.
- Employee-friendly plans boost retention and your own savings potential.
What Type of Retirement Plan Aligns with My Business Size and Goals?
Choosing a retirement plan isn’t just about saving money—it’s about finding an option that works with your business structure.
Here’s what I’ve noticed over 15+ years advising business owners: Many pour money into plans their business isn’t built to sustain. You don’t need a giant 401(k) if you’re a one-person operation. Still, understanding the benefits of a 401(k) plan can help you make an informed choice. If you’ve got a small team that changes seasonally, flexibility becomes key.
According to Pew Research, only 57% of private-sector firms with fewer than 100 workers offer a retirement benefit plan, compared to 86% of companies with 100+ workers. This gap shows many small businesses miss opportunities to secure their future.
Whether you’re hiring your first employee or managing a lean team of ten, here’s how the most common plans compare:
| Plan Type | Best For | 2024 Contribution Limits |
| SEP IRA | Solopreneurs or <5 employees | Up to 25% of comp, max $69,000 |
| SIMPLE IRA | <100 employees | $16,000 (+$3,500 if 50 or older) |
| Solo 401(k) | Owner-only businesses | $69,000 (+$7,500 catch-up if 50+) |
| Safe Harbor 401(k) | Teams that want no compliance hassle | $23,000 + 3–4% employer match |
To get the complete details on all available options, check out the IRS guide on best retirement plans for individuals and small businesses.
📌 Real Talk: A tech startup I worked with had 10 employees and adopted a Safe Harbor 401(k). It saved them on administration, passed compliance checks automatically, and employee contributions jumped 20% in two years. That’s good plan design in action.
How Will My Business’s Value Fund My Retirement?
If you’re banking on your business being your nest egg—you better know exactly what it’s worth.
The problem? Many owners overestimate value and forget to factor in market timing, taxes from a sale, or whether there’s even a buyer for the business when retirement comes knocking.
According to Fidelity Investment research, 83% of small business owners worry about affording retirement, with 48% believing they simply cannot afford a plan. This concern often stems from overreliance on business value rather than diversified retirement savings.
Here’s what you can do today:
- Get a third-party business valuation (not your buddy’s guess or a back-of-napkin estimate).
- List all assets: not just inventory or location—think intellectual property, client contracts, even domain value.
- Don’t put all your eggs in one business: Aim to keep no more than 70–80% of your net worth in company equity. Consider self-employed retirement alternatives to diversify your future income.
- Explore seller financing if you plan to pass the business to a child or employee. This creates a reliable income stream after exit.
Remember, even the best retirement plan won’t save you if you don’t protect your biggest retirement asset—your business itself.
Am I Maximizing Tax Benefits Without Compliance Risks?
Here’s where it gets tricky—and potentially expensive.
I had a client once contribute $10,000 more than the SEP IRA limit. You’d think that would work in their favor. Nope. That one mistake triggered an IRS excise tax—plus hours of accounting fixes. The solution? We added payroll automation with contribution limit controls.
To stay compliant while maximizing tax advantages:
- Check 401(k) nondiscrimination rules if you’re running a traditional plan. Failing these tests can cost big.
- Choose between Roth and Traditional IRAs depending on your tax bracket—lower income years might be the best time to switch to Roth.
- Audit all plan fees. Flat-fee plans often beat asset-based ones in small businesses. Learn more about maximizing home-business tax benefits for optimal financial planning.
Understanding your plan’s fee structure is critical—research from BCG Benefits shows excessive fees can reduce an employee’s retirement savings by 25% or more over their career. Find comprehensive guidance on retirement planning strategies to minimize fees from the Department of Labor.
💡 Tip: Roth conversions can work exceptionally well for business owners with variable income. If your revenue dips, it might be the perfect time to convert traditional IRA funds to Roth accounts for long-term tax advantages.
What Happens If I Retire Later—Or Earlier—Than Planned?
Life throws curveballs. Market dips, health issues, or just wanting to hand the reins over sooner than expected—it all happens.
Flexible retirement plans and backup strategies are essential. Here’s how to protect your future:
- Build a 12-month emergency fund outside of retirement accounts. This gives you room to wait out downturns without raiding your 401(k) early.
- Include profit-sharing in your 401(k) plan to incentivize long-term employee loyalty—especially helpful if you’re phasing out and need operational stability.
- Review and revise your buy-sell agreements annually. This ensures ownership transfers quickly if something unexpected happens.
You don’t just want to retire—you want to retire on your own terms, with the lifestyle you’ve worked hard to build.
Bonus: How Do I Balance Employee Benefits With My Own Retirement?
This question challenges many owners. Based on my experience, here’s a win-win approach: Use auto-enrollment with annual contribution increases.
Your employees win because they save automatically—with rising contribution rates each year. You win because it bumps plan participation rates, which keeps your plan compliant and unlocks richer features for you—like profit sharing or higher contribution caps.
Research from EBRI confirms this approach works—check out their 401(k) plans auto-enrollment research for the full data. The numbers don’t lie: auto-enrollment substantially increases participation and savings rates.
According to BCG Benefits, 90% of small firms that offer retirement benefits believe it positively impacts employee morale and retention. This makes retirement plans a competitive advantage in both recruitment and keeping your best talent.
Start with this simple setup:
- Auto-enroll at 4%
- Increase 1% annually
- Cap at 10% unless they opt out
When done right, your retirement plan will make your employees loyal—and help your own savings grow faster.
12-Month Retirement Plan Checklist
Let’s make this real. Here’s what your upcoming year could look like:
🗓️ Quarter 1
☐ Audit your existing plan for hidden fees and compliance gaps
☐ Compare 401(k) provider costs against flat-fee options
🗓️ Quarter 2
☐ Get a professional valuation of your business
☐ Identify and document all non-obvious assets (goodwill, recurring revenue, IP)
🗓️ Quarter 3
☐ Maximize annual contributions and check for SEP or IRA limits
☐ Evaluate a Roth conversion if income is lower than usual
🗓️ Quarter 4
☐ Update your estate and succession plan
☐ Confirm your buy-sell agreement reflects your current intentions
Conclusion
A retirement plan isn’t just a financial vehicle—it’s your roadmap to freedom, security, and legacy. You’ve built a business with hard work and determination. Now it’s time to ensure it takes care of you in return.
Start today by asking these four essential questions—and answering them with action. You’ve spent years building a business; now invest the same energy in securing your future.
Need help aligning your books with retirement goals? Visit Complete Controller for bookkeeping, controller, and financial management services that make retirement planning simpler and more strategic.
FAQ
What’s the easiest retirement plan for a solopreneur?
For solopreneurs, a SEP IRA is typically the simplest option with minimal paperwork and administration. If you want higher contribution limits or the ability to borrow from your contributions, consider a Solo 401(k). Both allow you to contribute up to 25% of your income or $69,000 (2024 limit), whichever is less.
How much should I be saving for retirement as a business owner?
Aim to save 15–20% of your business’s net income at minimum. Focus on tax-advantaged accounts first, then consider additional investments. Your goal should be replacing at least 70-80% of your pre-retirement income. Since business owners often have variable income, save more during profitable years.
Can I have more than one retirement plan at the same time?
Yes, you can maintain multiple plan types, but total contributions typically max out according to IRS guidelines. For example, you might have both a Solo 401(k) and a traditional IRA, but your combined tax-advantaged contributions can’t exceed annual limits. Consult a tax professional about your specific situation.
What if I can’t afford to match employee contributions?
Consider a SIMPLE IRA, which requires only 2–3% matching and offers year-to-year flexibility. Alternatively, a traditional 401(k) doesn’t require matching, though it does face annual nondiscrimination testing that may limit your own contributions if employees don’t participate enough.
How do I protect my retirement if my business fails?
First, keep retirement accounts legally separate from business assets. Structure your business (LLC or S-Corporation) to limit personal liability. Diversify investments outside your company—ideally, your business should represent no more than 50-70% of your total retirement assets. Maintain separate emergency savings to avoid early withdrawals from retirement accounts during business downturns.
Sources
- BCG Benefits. (2025-01-24). “What’s Keeping Small Businesses From Offering Retirement Plans.” Retrieved from https://www.bcgbenefits.com/blog/small-businesses-retirement-plans
- Complete Controller. “The Benefits of a 401(k) Plan.” Retrieved from https://www.completecontroller.com/the-benefits-of-a-401k/
- Complete Controller. “Self-Employed Retirement Alternatives.” Retrieved from https://www.completecontroller.com/self-employed-retirement-alternatives-to-increase-the-pension/
- Complete Controller. “Maximizing Home-Business Tax Benefits.” Retrieved from https://www.completecontroller.com/maximizing-home-business-tax-benefits/
- Department of Labor. “Understanding Retirement Plan Fees and Expenses.” Retrieved from https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/understanding-retirement-plan-fees-and-expenses.pdf
- EBRI. (2022, May). “401(k) Plans Auto-Enrollment Research.” Retrieved from https://www.ebri.org/docs/default-source/fast-facts/ff-401k-11-may22.pdf
- Fidelity Investment. (2023-05-11). “Despite Concerns About the Future, Two-Thirds of Small Businesses Do Not Currently Offer Retirement Savings Benefits.” Retrieved from https://newsroom.fidelity.com/pressreleases/fidelity-study–despite-concerns-about-the-future–two-thirds-of-small-businesses-do-not-currently-o/s/72432825-233e-4a33-a470-3bed305b2f04
- Internal Revenue Service. “Retirement Plans for Small Business.” Retrieved from https://www.irs.gov/pub/irs-pdf/p560.pdf
- Paychex. (2024-11-14). “Retirement Industry Trends To Watch for 2025.” Retrieved from https://www.paychex.com/articles/employee-benefits/retirement-trends
- Pew Research. (2024-07-25). “Small Employers’ Economics of Offering Retirement Savings Plans.” Retrieved from https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2024/07/small-employers-economics-of-offering-retirement-savings-plans
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