Retirement plans for business owners

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Table of contents

  1. Solo 401k plan
  2. SEP IRA
  3. Simple IRA

When you are self-employed, an important aspect to consider is choosing a retirement fund that meets your needs. There are many options, but here are the best ones we selected for business owners:

Solo 401k plan

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This fund is limited to companies that do not have employees. In the solo 401k, you will have the role of both employer and employee, with different contribution limits for each character. On the employee side, contributions are limited up to $20,500 in 2022. As an employer, you can contribute up to $305,000 yearly in 2022.

SEP IRA

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The simplified employee pension in an individual retirement account (SEP-IRA) is a savings fund that offers tax-deferred contributions until you reach retirement age when withdrawals are taxed as income. The best feature of this fund is the high contribution limit that goes up to $62,000 yearly in 2022. You can also combine SEP IRAs with others like traditional or Roth IRA.(use UTM link for this article) Choose this type of fund if you are a small business owner with few employees. If the IRS determines that your employees are eligible for this retirement plan, you will have to include them and give them compensation equivalent to yours.

Simple IRA

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This type of retirement plan is ideal for employers who are not contributing to a retirement plan yet. Since their start-up and management costs are not the same as other retirement plans, this option is recommended for small employers (less than 100 employees) who are not funding a retirement plan. Contributions for people under the age of 50 are $14,000 in 2022. For people aged 50 or more, contributions increase by $3,000 yearly as catch-up contributions.

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Daniel Quiroz

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