Retirement Planning for Business Owners: A Practical Guide

If you own a business, your retirement planning is more complex — and more powerful — than it is for most employees. You have access to retirement vehicles that can shelter significantly more income from taxes than a standard 401(k), but only if you know how to use them.

This guide walks through the key retirement plan options for business owners and how to choose the right one for your situation.

Why Business Owners Often Under-Save for Retirement

Business owners tend to reinvest profits back into the business rather than into retirement accounts. This is understandable — but it creates a dangerous dependency on the business as the primary retirement asset.

The problem: businesses don't always sell for what owners expect. Markets change, industries shift, and health events can force an exit at the wrong time. A diversified retirement strategy — separate from the business — is essential.

Retirement Plan Options for Business Owners

Solo 401(k) — Best for Self-Employed with No Employees

If you're self-employed with no full-time employees (other than a spouse), the Solo 401(k) is one of the most powerful retirement vehicles available.

• 2026 contribution limit: Up to $70,000 (employee + employer contributions combined)
• Catch-up contribution (age 50+): Additional $7,500
• Roth option: Available with many providers
• Loan provision: Available

SEP IRA — Simple and Flexible

The Simplified Employee Pension (SEP) IRA is easy to set up and administer, making it popular with sole proprietors and small business owners.

• 2026 contribution limit: Up to 25% of compensation, max $70,000
• Employee contributions: Not allowed (employer only)
• Setup deadline: Tax filing deadline (including extensions)
• Best for: Businesses with variable income; easy to skip contributions in lean years

SIMPLE IRA — Good for Small Teams

The SIMPLE IRA is designed for businesses with 100 or fewer employees. It requires employer contributions, which makes it a meaningful benefit for your team.

• Employee contribution limit: $16,500 in 2026
• Employer match: Required (either 3% match or 2% non-elective)
• Best for: Small businesses that want to offer a retirement benefit without the complexity of a 401(k)

Traditional 401(k) — Best for Growing Teams

Once you have a team of employees, a traditional 401(k) plan offers the most flexibility and the highest contribution limits.

• Employee contribution limit: $23,500 in 2026
• Employer match: Optional but powerful for retention
• Safe harbor provisions: Can simplify compliance testing
• Best for: Businesses with 5+ employees who want a competitive retirement benefit

Defined Benefit Plan — Maximum Tax Shelter

For high-income business owners who want to shelter the most income possible, a defined benefit (pension) plan can allow contributions of $200,000+ per year, depending on age and income.

These plans are complex and expensive to administer, but the tax savings can be extraordinary for the right situation.

Coordinating Your Business Exit with Retirement

Many business owners plan to fund retirement by selling the business. This can work — but it requires planning years in advance.

Key considerations:

• Business valuation: Do you know what your business is actually worth today?
• Buyer pool: Who are the likely buyers, and what will they pay?
• Tax structure: How the sale is structured dramatically affects your after-tax proceeds
• Timing: Market conditions at the time of sale are outside your control

A retirement plan that doesn't depend entirely on a business sale is a much more secure foundation.

The Right Strategy Depends on Your Situation

There's no one-size-fits-all answer. The right retirement plan depends on your income, your number of employees, your tax situation, and your timeline.

Our team works with business owners to design retirement strategies that maximize tax efficiency, build wealth outside the business, and create a foundation for a secure retirement — regardless of what happens with the business.

Schedule a conversation with Todd Anderson to review your current retirement strategy and identify opportunities you may be missing.

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Anderson Financial Group provides independent financial and insurance planning for businesses and families. We are not affiliated with any single investment firm or carrier.