what are business retirement plans

Get a retirement plan that’s right for your business

Small-business owners have unique needs when it comes to saving for their retirement and helping their employees. 

We've recently announced that existing Individual 401(k), SIMPLE IRA, and SEP-IRA plans with multiple participants will be transferred to Ascensus. If you're just getting started, those plans can be established directly with Ascensus. Vanguard will continue to offer a one-person SEP-IRA.

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Consider small-business retirement plans.

VANGUARD SEP-IRA (One person)

The SEP-IRA (Simplified Employee Pension) is the simplest option for small-business owners. Looking to open a SEP-IRA for only one person? We’ve got you covered.

View the Vanguard SEP-IRA

ASCENSUS Individual(k)

An Individual(k)—also known as Individual 401(k)—maximizes retirement savings if you're self-employed or a business owner with no employees other than your spouse. Ascensus also offers a Roth option.

ASCENSUS SIMPLE IRA

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a great starter plan that encourages employees to contribute to their retirement.

ASCENSUS SEP IRA (Multiple participants)

Ascensus offers a multi-participant SEP IRA that can support a business that employs others and provides access to a diverse lineup of Vanguard mutual funds.

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Size up your small-business retirement plan choices

Get to know retirement plans for small businesses. Try our interactive tool to see which plan may be best for you and your business.

An experienced provider to meet your needs

As we focus on areas where we can provide the highest value, we want to be sure your small-business plan thrives. Ascensus was founded more than 40 years ago with a singular purpose—to help people save for what matters. As an industry leader, they provide versatile capabilities, insights, and experience to meet your plan’s needs.

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As a leading provider of tax-advantaged savings and retirement solutions, you’ll benefit from Ascensus’s extensive retirement experience through all stages of your financial journey.

Ascensus’s market insights and educational resources—along with dedicated professionals serving small-business plans—will provide support for your personal and business success.

Delivering streamlined digital experiences with the needs of small businesses in mind, Ascensus's platforms are designed to provide flexibility, scalability, security, and cost-efficiency.

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You'll have access to a diverse lineup of Vanguard mutual funds within your retirement account at Ascensus.

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You can open a SEP-IRA at Vanguard if there is only one person. Give us a call so we can help you get started with your plan.

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Other plan types for small business owners can be opened directly through Ascensus. Visit their website to learn more.

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If you own a small business—or plan to—sponsoring a tax-advantaged retirement savings plan has clear benefits. A retirement plan helps to secure your and your employees’ financial futures. That, in turn, helps with retention (by fostering loyalty among your workers) and recruitment (by attracting top talent to your firm). And that combination can boost your bottom line.

The good news is that there are retirement plans for small businesses and sole proprietors with various budgets, resources, and needs. The bad news is that not enough entrepreneurs take advantage of them. The small business association SCORE reports that in 2022, fully one-third (34%) of small business owners had no retirement savings plan  Open in new tab for themselves, let alone for their employees. And  71% of those owners cite cost as a deterrent. But setting up and maintaining a retirement program doesn’t have to be expensive. In fact, SCORE says, the average plan costs 2.4% of employees' compensation.

If you’re on the fence about offering a retirement plan for your business, here’s what you should know.

Why your business should offer a retirement plan

Beside employee satisfaction—and maybe productivity—there are a variety of benefits  Open in new tab to establishing a retirement plan for your business. Among them:

• Tax breaks for your business. Employer contributions are tax-deductible: You can subtract contributions from your income to lower your tax liability.
• Assets grow tax-deferred. Retirement savings can grow tax-deferred until withdrawn. This feature encourages people to save and invest  more for retirement.
• Potential for tax credits. As a small business owner, you may be eligible for a tax credit  Open in new tab , toward plan startup costs up to $5,000 a year for three years. Also, low-income employees who contribute to their accounts may be eligible for the Saver's Credit  Open in new tab at tax time.
• Flexible plan options. An array of retirement plans are available with different benefits and costs.
• Competitive advantage. Businesses that offer retirement plans may find it easier to draw and keep top talent, lowering turnover and onboarding costs. Most (52%) small business owners say retirement benefits help attract higher-quality employees Open in new tab .

Retirement plan options for small businesses

Small business retirement options fall into two buckets:

• Individual retirement accounts (IRAs). These plans allow employees to set up and manage their accounts. They’re also a simple and low-cost way to help your employees save for retirement.
• Employer-sponsored plans. 401(k), 403(b), and profit-sharing plans accept contributions from employers, employees, or both. In turn, these plans have higher contribution limits than IRAs.

Whether you sponsor an IRA, 401(k), or profit-sharing retirement plan, you become a “fiduciary.” This means you must act in your employees’ best interest when establishing and operating your plan. Setting up an employer-sponsored plan will likely require you to work with a third-party plan administrator.

Your plan administrator, who also assumes the position of a fiduciary, helps you manage the plan’s day-to-day operations. This can include tasks like recordkeeping, accounting, legal, and trustee services.

Firms that specialize in retirement planning also may offer investment management. As a fiduciary, it's your responsibility to provide a reasonably priced, diversified menu of investment options that accommodate varying risk levels. Those options typically include a range of mutual funds that hold stocks, bonds, “stable value,” and other investments.

In particular, “target-date” funds, whose broad investment mixes grow more conservative over time, can make for one-stop investing. And thanks to the SECURE Act of 2019, it’s now easier for employer-sponsored plans to include annuities, which can provide a protected stream of income in retirement.

Even so, make sure not to offer too many investment choices. That can overwhelm your employees and leave them feeling helpless. An investment advisor (who can also be your plan administrator) can help you implement a strategy, choose investments, and understand their associated costs. 

You should also understand the cost of running a retirement plan. Many administrators offer discounts for keeping larger amounts of assets under their management. So, businesses with smaller portfolios generally pay higher administrative rates than larger businesses. (Fees are paid directly by the business or charged to participants’ accounts.)

Plans that hold more assets (typically $1 million and above) can enjoy lower investment fees by offering “institutional” share classes. Essentially, these mutual funds mirror their retail-class cousins but offer employees a volume discount on annual expenses.

When you’re choosing a retirement plan  PDF open in new tab  for your business, consider flexibility, contribution options for you and your employees, and costs. Familiarizing yourself with the different types of plans can help you choose the right one for your situation.

Types of IRA plans

Either you or your employees will open an IRA with a financial institution, and each participant will manage their own account  Open in new tab . A key advantage is that it you can avoid administrative work and the costs of managing a 401(k) program while helping your employees save for retirement in a tax-favored investment plan.

To make your company’s IRA more enticing to employees, you can offer matching contributions to their retirement funds. But keep in mind that participants are immediately 100% vested  Open in new tab  in, or fully own, the money in the account. Employers can’t reclaim their contributions for any reason, including employees making a quick departure from the company. 

Depending on the type of 401(k) or IRA plan , employees can choose to open a traditional or a Roth version. A traditional 401(k) or IRA lets employees contribute, or “defer,” via payroll deduction before taxes are taken out. The accounts grow tax-deferred, and participants owe income tax when they make withdrawals.

In contrast, contributions to a Roth account are taxed before they are made. Then, when the participant retires, they won’t owe tax on withdrawals if they’ve held the account for at least five years and met other criteria.

Note that withdrawals from either account before age 59½ can trigger regular income tax plus a 10% penalty on the amount cashed out. One exception: Most hardship withdrawals  Open in new tab due to an “immediate and heavy financial need” (like medical and funeral expenses) are exempt from the additional penalty.

Also, unlike an employer-sponsored 401(k), IRA holders can’t borrow from their accounts. That’s one less administrative task to worry about if you decide to offer IRAs.

Here’s a quick look at key similarities and differences between small business IRAs.

At a glance: Small-business IRA plans

Payroll deduction IRA

With payroll deduction IRAs  Open in new tab , each employee sets up and manages their own traditional or Roth IRA. Your role is purely administrative: Transmit payroll deductions authorized by employees to their financial institutions.

These IRAs are the easiest and cheapest retirement plans to set up and administer. Note that since only account holders (employees) can fund their accounts, there are no employer contributions to deduct from your business income for tax purposes.

Also, annual contribution limits are lower than with other 401(k) and IRA plans ($7,000; $8,000 for participants age 50+ in 2024). So, payroll deduction IRAs may not create as much employee goodwill as other plans might.

A Simplified Employee Pension Open in new tab (SEP) IRA only allows contributions from employers (you’d use that designation even as a sole proprietor).

This plan allows businesses to adjust their contribution rate each year. So, if your company experiences a down year, you can contribute less—or not at all. But if you do well, you can reward employees with increased contributions.

SEP contribution limits exceed those of regular IRAs: as much as 25% of each eligible employee’s income, up to $69,000 in 2024. The catch: You must contribute at the same rate for all qualified employees. (To qualify, employees must be at least age 21 and who have worked at least three of the previous five years.)

Those uniform rates are a “nondiscrimination requirement,” which prevents top earners from receiving disproportionately higher contributions than earners with lower incomes. However, businesses don’t need to undergo nondiscrimination testing, a costly and complex process required for standard 401(k)s.

Yet even though SEP IRAs are easier and cheaper to implement, they require more setup than simple payroll-deduction plans. For example, you must designate a trustee to receive and invest the plan’s funds. And you must submit IRS  Form 5305-SEP  PDF open in new tab , which outlines participant requirements and how your contributions will be allocated.

On the downside, SEP IRAs don’t allow catch-up contributions for employees 50 and older. And in general, if you offer a SEP IRA, you can’t offer any other retirement plan  Open in new tab , like a profit-sharing program. (For the employee’s part, if they pull money from an SEP IRA before age 59½, they could face income taxes plus a 10% early-withdrawal penalty on the amount they withdraw.)

Consider this plan if you want, well, a simple way to attract and retain employees by helping them fund their futures. Short for “Savings Incentive Match Plan for Employees,” (SIMPLE) IRAs  Open in new tab are meant for businesses with less than 100 workers. To participate, employees must have earned at least $5,000 during any two preceding calendar years and expect to earn that much during the current calendar year.

Unlike an SEP IRA, there’s no annual filing requirement for employers. More importantly, you must contribute to employees’ accounts. While this could increase payroll costs, you can write off your contributions on your business taxes. Also, employees can elect to contribute through payroll deduction.

As an employer, you can choose between two types of contributions:

• Matching: You can match employees’ contributions of up to 3% of their compensation. Employees can usually contribute up to $16,000 in 2024 ($19,500 if they’re 50 or older). Exceptions: If your business has 25 or fewer employees—or you have up to 100 employees and provide a 4% match or a 3% employer contribution—employees can sock away up to 110% of the standard limits.
• Non-elective: Each year, you must contribute an amount equal to 2% of the employee’s salary (up to an annual compensation limit—$345,000 in 2024), even if the employee doesn’t contribute.

When establishing a SIMPLE IRA, you must complete IRS Form 5305-SIMPLE PDF open in new tab , which directs the plan’s contributions to your preferred financial institution. (If you allow employees to receive contributions through their own IRA custodian, complete Form 5304-SIMPLE  PDF open in new tab  instead.) As with other plans, participants who withdraw from a SIMPLE IRA before age 59½ will face income taxes and a 10% penalty.

Types of 401(k) plans

As with an IRA, employees can make pretax contributions to a 401(k) account. These accounts are set up and managed by employers, who can match some or all of employee contributions. That represents an important advantage over many IRAs.

Also, except for SIMPLE 401(k)s, 401(k) plans offer higher contribution ceilings than IRAs. In 2024, employees can contribute up to $23,000 of their pay to a 401(k) account. If you include employer contributions, the combined limit  Open in new tab is $69,000 or 100% of the employee’s compensation, whichever is less. 

But instituting and maintaining 401(k)s requires more legwork and can be costlier than IRA plans. For one thing, businesses with fewer than 100 employees must file an annual Form 5500-SF  PDF open in new tab with the Department of Labor Open in new tab . This ensures that the plan adheres to regulations defined by the Employee Retirement Income Security Act of 1974  (ERISA)  Open in new tab .

For the standard 401(k), businesses also must pass an annual  nondiscrimination test  Open in new tab . This process ensures contribution rates don’t disproportionately favor highly compensated employees (HCEs). But it adds an extra layer of complexity and cost to the plan. Fortunately, many small business 401(k) plans allow you to bypass this requirement.

401(k) participants can also borrow from their accounts or take hardship withdrawals to cover certain expenses. While this could be a lifeline for those in financial need, it increases your administrative burden.

Finally, all 401(k)s have eligibility requirements  Open in new tab . Participants must be 21 or older and have worked for the company for at least one year. (Traditional 401(k)s can require two years if the plan guarantees 100% vesting afterward.)

Self-employed 401(k)

A self-employed 401(k) plan Open in new tab helps business owners with no employees and sole proprietors save for retirement. Despite the name, plan benefits can extend to a spouse your business employs: They can set up and save through their own account.

Self-employed 401(k)s allow participants to make contributions as an employee and an employer. As a result, solopreneurs may be able to squirrel away more with a 401(k) than with a traditional IRA.

Participants can save up to $69,000 in 2024  Open in new tab . Also, unlike SEP IRAs, solo 401(k)s allow $7,500 in catch-up contributions for taxpayers 50 or older, bringing the overall limit to $76,500.

These aspects can make 401(k)s ideal for self-employed individuals who want to save large amounts each year. But if your account totals $250,000 or more, you must file Form 5500-EZ  PDF open in new tab  with the IRS each year. And as with other plans, if you withdraw money before age 59½, you could face a 10% penalty and income tax on the amount you take.

SIMPLE 401(k) plans

A SIMPLE 401(k) plan  Open in new tab looks a lot like a SIMPLE IRA. Like the IRA version, SIMPLE 401(k)s have potentially lower contribution limits than other 401(k)s.

You have two choices:

• Matching contributions: You match employees’ contributions, dollar for dollar, of up to 3% of their pay. As with SIMPLE IRAs, employees can contribute up to $16,000 in 2024 ($19,500 if they’re age 50 or older).
• Nonelective contributions: You contribute the equivalent of up to 2% of the employee’s salary up to an annual compensation limit ($345,000 in 2024), even if the employee doesn’t contribute themselves.

While SIMPLE IRA and 401(k) plans are similar, they aren’t identical. For example, IRA plans don’t allow loans, while SIMPLE 401(k)s do, which could increase your administrative overhead. SIMPLE 401(k)s also require you to file IRS Form 5500-SF.

Safe harbor 401(k)

Safe harbor 401(k) plans  Open in new tab allow businesses to bypass time-consuming, costly IRS nondiscrimination testing often required for standard 401(k)s. You can contribute to eligible employees’ accounts in one of three ways:

• Nonelective contributions: You must contribute an amount equal to 3% of eligible employees’ salaries regardless of whether they contribute. Consider making nonelective contributions if you’re looking for a simple, predictable structure.
• Basic match: Employers must match 100% employee’s contributions up to the first 3% of salary they contribute and 50% of the next 2% they save. This option is best if you want flexibility in your contributions and to encourage employee contributions.
• Enhanced matching: Matches must be at least as generous as the basic match option. Offering lucrative matches can help you attract and retain top-tier employees.

Nonelective and basic match contributions automatically satisfy actual deferral percentage (ADP) and actual contribution percentage (ACP) nondiscrimination testing. If you offer enhanced matching, it must adhere to ACP and ADP requirements.

The best contribution strategy for your business will depend on your goals, budget, and employees’ needs. A retirement planning or investment advisor can help you understand the risks and drawbacks of each option and offer advice for designing your plan.  

Employees can contribute  Open in new tab up to $23,000 to their safe harbor 401(k) in 2024. Those aged 50 and up also can make $7,500 in catch-up contributions, increasing their total to $30,500. Employer and employee contributions combined can’t top $69,000 ($75,500 for employees age 50+). One downside is that you must make a matching contribution, even if your business is suffering.

Profit-sharing plans

Profit-sharing is a type of employer-sponsored plan that allows you to make voluntary contributions, sharing your business’ wealth with employees in good times. But you don’t have to worry about giving if the fortune of your business wanes. Employers can offer profit-sharing in tandem with other qualified retirement plans, such as 401(k)s.

Profit-sharing plans include only employer contributions. In 2024, businesses can contribute up to 100% of employees’ compensation or $69,000, whichever is less. But you may see higher administrative costs than for a SEP or SIMPLE IRA, as profit-sharing plans must undergo an annual nondiscrimination test.

Small business owners can offer employees a cash plan, which pays them cash bonuses. Employees owe taxes on the payouts as ordinary income. In a deferred plan , employees can withdraw money after retirement. They aren’t taxed until then.

At a glance: Small business employer-sponsored retirement plans

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What Is a Solo 401(k)?

How the solo 401(k) works.

• Who Is Eligible?

How to Set Up a Solo 401(k) Plan

• Eligibility Requirements
• Contribution Limits

Other 401(k) Plans

Contributions example, other benefits of a solo 401(k), the bottom line.

• Retirement Planning

A 401(k) Plan for the Small Business Owner

The solo 401(k) plan is worth a look

Roger Wohlner is an experienced financial writer, ghostwriter, and advisor with 20 years of experience in the industry.

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The 401(k) plan has gained popularity among small business owners ever since 2001, when some changes to federal tax law made it a better and more flexible choice for their needs compared with some other retirement savings options. These 401(k) plans are known as “solo 401(k)” plans.

Key Takeaways

• A solo 401(k) plan is for businesses whose only eligible participants in the plan are its owners (and their spouses, if they work for the business).
• These plans are often less complicated and less expensive to set up.
• If you have non-owner employees, they must not meet the eligibility requirements you select for the plan.
• There are two components to a solo 401(k) plan: employee elective-deferral contributions and profit-sharing contributions.
• A solo 401(k) may also offer loans, doesn’t require nondiscrimination testing, and allows for the deduction of plan contributions of up to 25% of eligible compensation.

The solo 401(k) is a retirement savings option for small businesses whose only eligible participants in the plan are the business owners (and their spouses, if they are also employed by the business). It can be a smart way for someone who is a sole proprietor or an independent contractor to set aside a decent-sized nest egg for retirement.

Various financial institutions have their own names for the solo 401(k) plan. The independent 401(k) is one of the most generic. Other examples include:

• Solo 401(k)
• One-participant k
• Individual 401(k)
• Self-employed 401(k)

If you are not sure which name your financial service provider uses, ask about the 401(k) plan for small business owners. The Internal Revenue Service (IRS) provides a handy primer on such plans.

Who Is Eligible for Solo 401(k) Plans?

A common misconception about the solo 401(k) is that it can be used only by sole proprietors. In fact, the solo 401(k) plan may be used by any small business, including corporations, limited liability companies (LLCs), and partnerships. The only limitation is that the only eligible plan participants are the business owners (and their spouses, provided they are employed by the business).

A person who works for one company (in which they have no ownership) and participates in its 401(k) can also establish a solo 401(k) for a small business they run on the side, funding it with earnings from that venture. However, the aggregate annual contributions to both plans cannot collectively exceed the IRS-established maximums.

For small business owners who meet certain requirements, most financial institutions that offer retirement plan products have developed truncated versions of the regular 401(k) plan for use by business owners who want to adopt the solo 401(k). As a result, less complex documentation is needed to establish the plan. Fees may also be relatively low. Make sure to receive the proper documentation from your financial services provider.

As noted above, the solo 401(k) plan may be adopted only by businesses in which the only employees eligible to participate in the plan are the business owners and eligible spouses. For eligibility purposes, a spouse is considered an owner of the business, so if a spouse is employed by the business, you are still eligible to adopt the solo 401(k).

If your business has non-owner employees who are eligible to participate in the plan, your business may not adopt the solo 401(k) plan. Therefore, if you have non-owner employees, they must not meet the eligibility requirements you select for the plan.

You may exclude from a solo 401(k) nonresident aliens who received no U.S. earned income from you, as well as any employees who are entitled to benefits under a collective-bargaining agreement.

Solo 401(k) Eligibility Requirements

Setting the wrong eligibility requirements could result in you being excluded from the plan or non-owner employees being eligible to participate in the plan.

For example, say you elect zero years of service as a requirement to participate, but you have five seasonal employees who work fewer than 1,000 hours each year. These employees would be eligible to participate in the plan because they meet the age and service requirements. Consequently, their eligibility would disqualify your business from being suitable to adopt the solo 401(k) plan. Instead, you could adopt a regular 401(k) plan.

Some solo 401(k) products, by definition, require further exclusions. Before you decide to establish a solo 401(k) plan, be sure to check with your financial services provider regarding its provisions.

Contribution Requirements

You may require an employee to perform one year of service before becoming eligible to make elective-deferral contributions to a 401(k) and two years of service in order to be eligible to receive  profit-sharing contributions. However, most solo 401(k) plans will limit the latter requirement to one year.

An employee is considered to have performed one year of service if they work at least 1,000 hours during the year. While you may choose to require fewer than 1,000 hours under a regular qualified plan, most solo 401(k) plans include a hard-coded limit of 1,000 hours.

Solo 401(k) Contribution Limits

There are two components to the solo 401(k) plan: employee elective-deferral contributions and profit-sharing contributions.

Employee Contribution Limits

You may make a salary-deferral contribution of up to 100% of your compensation or the annual limit for the year, whichever is less. For 2024 the limit is $23,000, plus a catch-up contribution of $7,500 for people age 50 or over.

Employer Contribution Limits

In 2024 the business may contribute up to 25% of your compensation (calculations are required in the case of the self-employed) but no more than $69,000. An employee aged 50 or above can still make the above-mentioned $7,500 catch-up contribution.

In comparison with other popular retirement plans, the solo 401(k) plan has high contribution limits, which is the key component that attracts owners of small businesses. Some other retirement plans limit the contributions by employers too, or set lower limits on salary-deferred contributions.

The following is a summary of contribution comparisons for the employer plans generally used by small businesses.

As mentioned earlier, you may make employee elective-deferral contributions of up to 100% of your compensation but no more than the elective-deferral limit for the year. Profit-sharing contributions are limited to 25% of your compensation (or 20% of your modified net profit if your business is a sole proprietorship or partnership). The total solo 401(k) contribution is the employee elective-deferral contribution plus the profit-sharing contribution—up to $69,000 for 2024.

If your business is a corporation, the profit-sharing contribution is based on the W-2 wages you receive. If you receive $70,000 in W-2 wages, for instance, your profit-sharing contribution could be up to $17,500 ($70,000 x 25%). When added to a salary-deferral contribution of $19,000, the total would be $36,500.

If your business is a sole proprietorship or partnership, the calculation gets a little more involved. In this case your profit-sharing contribution is based on your modified net profit and is limited to 20%. The IRS provides a step-by-step formula for determining your modified net profit in IRS Publication 560.

There are a number of other benefits that come with the solo 401(k).

As with other qualified plans, you may be able to borrow from a solo 401(k) up to (1) the greater of $10,000 or 50% of the balance or (2) $50,000, whichever is less. Check the plan document to determine if any other limitations apply.  

5500 Filing May Not Be Required

Because the plan covers only the business owner, you may not be required to file a Form 5500 series return if your balance is below $250,000.

No Nondiscrimination Testing

Generally, certain nondiscrimination testing must be performed for 401(k) plans. These tests ensure that the business owners and higher-paid employees do not receive an inequitably high amount of contribution when compared with lower-paid employees.

Such tests can be very complex and may require the services of an experienced plan administrator , which can be costly. Because the solo 401(k) plan covers only the business owner, there is no one against whom you can discriminate, so these tests are not required.

Deducting Contributions

Similar to other employer plans, the solo 401(k) allows you to deduct plan contributions of up to 25% of eligible compensation. For plan purposes compensation is limited in 2024 to $345,000. Earnings over that amount are disregarded for plan purposes.

Can I Have a 401(k) for My LLC?

Yes, any business is able to set up a 401(k). If you are self-employed, you can create a solo 401(k) as a limited liability company (LLC)—assuming you meet all the other eligibility requirements.

What Is the Minimum Number of Employees Needed for a 401(k)?

A business of any size can offer a 401(k) plan. A solo 401(k) is for business owners with no employees.

How Much Can a Small Business Owner Contribute to a 401(k)?

The maximum contribution for a small business owner to a 401(k) in 2024 is $69,000 ($76,500 if you’re 50 or older)—which includes contributions as the employee and employer.

If you own more than one business, you should check with your tax professional to determine whether you are eligible to adopt the solo 401(k). Ownership in another business that covers employees other than the business owner could result in your being ineligible for this type of plan.

Internal Revenue Service. " One-Participant 401(k) Plans ."

Charles Schwab. " Individual 401(k) Plan —Traditional & Roth ."

Fidelity. " Self-Employed 401(k) ."

Internal Revenue Service. " Retirement Plans for Self-Employed People ."

Internal Revenue Service. " Tax Guide for Small Business (For Individuals Who Use Schedule C) .” Pages 2 and 3.

Internal Revenue Service. " Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits ."

Internal Revenue Service. “ Election for Married Couples Unincorporated Businesses .”

Internal Revenue Service. “ 401(k) Plan Fix-It Guide - Eligible Employees Weren't Given the Opportunity to Make an Elective Deferral Election (Excluding Eligible Employees) .”

Internal Revenue Service. “ A Guide to Common Qualified Plan Requirements .”

Internal Revenue Service. “ 401(k) Plan Qualification Requirements .”

Internal Revenue Service. " 401(k) Limit Increases to $23,000 for 2024, IRA Limit Rises to $7,000 ."

Internal Revenue Service. " 2024 Limitations Adjusted as Provided in Section 415(d), etc. ," Page 1.

Internal Revenue Service. " 2024 Limitations Adjusted as Provided in Section 415(d), etc. ," Page 2.

Internal Revenue Service. “ Retirement Topics - SIMPLE IRA Contribution Limits .”

Internal Revenue Service. " Publication 560: Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) .” Page 6.

Internal Revenue Service. " Publication 560: Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) .” Page 23.

Internal Revenue Service. " Retirement Plans FAQs Regarding Loans ." Select "4. Under What Circumstances Can a Loan Be Taken From a Qualified Plan?"

Internal Revenue Service. " 401(k) Plan Fix-It Guide - The Plan Failed the 401(k) ADP and ACP Nondiscrimination Tests ."

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Home » Insights » Investing » From SEP to 401(k): Comparing Retirement Plans for Small Businesses

From SEP to 401(k): Comparing Retirement Plans for Small Businesses

Director, Financial Planning

• May 20, 2024

Discover the best retirement plan for your small business. Explore the pros and cons of SEP, SIMPLE, and 401(k) options to help secure financial futures and retain top talent.

• Small Business , Business Owners

Choosing the right retirement plan for your small business is a crucial decision. It not only impacts your own future financial security as a small business owner but plays a significant role in attracting and retaining top talent. With various options available, each comes with its own set of advantages and disadvantages. In this article, we’ll delve into the pros and cons of some common retirement plans for small businesses.

Simplified Employee Pension (SEP) IRA

• Simplicity: SEP IRAs are easy to establish and maintain, making them ideal for small businesses with few or no employees.
• High contribution limits: Employers can contribute up to 25% of an employee’s compensation, up to $69,000 in 2024.
• Flexibility: Contributions are discretionary, allowing businesses to adjust contributions based on their financial situation.
• Employer contributions only: Employees cannot contribute to a SEP IRA, which may be a drawback for businesses looking to offer employee-funded retirement benefits.
• Mandatory contributions: If the employer decides to contribute for themselves, they must contribute the same percentage of compensation for all eligible employees.
• Vesting options: Employees are always 100% vested in their accounts. This plan type does not incentivize employee retention.

SIMPLE IRA (Savings Incentive Match Plan for Employees)

• Easy administration: Like SEP IRAs, SIMPLE IRAs have minimal administrative requirements, making them suitable for small businesses.
• Employee contributions: Employees can contribute to their SIMPLE IRAs through pre-tax and Roth salary deferrals, fostering a sense of ownership and responsibility for their retirement savings. Maximum employee contributions are $16,000 ($17,600, if the plan is eligible*) for 2024. Catch-up contributions are allowed for employees 50 years of age or older in the amount of $3,500 ($3,850 if eligible*).
• Matching contributions: Employers are required to match employee contributions up to 3% (4% if eligible) of compensation, which can serve as a valuable employee incentive.
• Lower contribution limits: Compared to other retirement plans, SIMPLE IRAs have lower contribution limits, which may not be sufficient for businesses with higher earning employees.
• Limited flexibility: Employers must make either matching contributions or non-elective contributions of 2% (3% if eligible*) of employee compensation, which may not align with varying business performance.
• Vesting options: Employees are always 100% vested in their accounts so this plan type does not incentivize employee retention.

401(k) plans

• High contribution limits: 401(k) plans offer higher contribution limits than SIMPLE IRAs, allowing employees to save more for retirement.
• Employee deferrals: Employees can contribute to their 401(k) accounts through pre-tax, Roth, and post-tax salary deferrals. Maximum employee contributions for 2024 are $23,000 with catch-up contributions of $7,500 for those employees aged 50 and over.
• Vesting options: Employers have the flexibility to choose vesting schedules, allowing them to incentivize employee retention. The two most common vesting schedules are 2-6 graded, where an employee vests 0% in year one but then 20% each subsequent year or three-year cliff, where an employee vests 0% in years one and two but then 100% in year three.
• Administration complexity: Compared to SEP and SIMPLE IRAs, 401(k) plans involve more administrative responsibilities and may incur higher costs.
• Compliance requirements: 401(k) plans are subject to strict compliance regulations, requiring annual testing to ensure the plan does not excessively favor highly compensated employees.
• Employer contributions: While optional, offering employer matching contributions can be costly for businesses, especially during economic downturns.

Choosing the right retirement plan for your small business requires careful consideration of various factors, including business size, stability of cash flow, employee demographics, and financial goals. While each retirement plan offers its own set of advantages and disadvantages, the key is to select a plan that aligns with your business objectives and provides valuable benefits to both employers and employees alike. Consulting with a financial advisor or retirement plan specialist can help navigate the complexities and make an informed decision tailored to your unique business needs.

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Making ends meet and saving for retirement at the same time can be a challenge for today’s employees. Many don’t have a plan or haven’t saved even a fraction of what they would need to retire comfortably. We aim to fix that.

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Take advantage of SECURE 2.0 Act tax credits to help offset up to 100% of (up to $5,000 per tax year for the first three years for some employers) your first three years of plan startup costs. The benefits of the SECURE 2.0 Act.

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Set up your plan 100% online, where and when it’s convenient for you—or call if you have questions. We’ve streamlined the investment selection and simplified the paperwork, too.

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Simple administration

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Take advantage of SECURE 2.0 Act tax credits to help offset your first three years of plan startup costs. * The benefits of the SECURE 2.0 Act.

Simply Retirement by Principal ® costs

One-time setup fee for bundled plans.

Every month

Recordkeeping fee will be billed to business owners quarterly ($435 plus per-participant fees). Pricing shown applies when working with a third party administrator (TPA). With bundled pricing, the recordkeeping fee is $185 per month ($555 billed quarterly) plus per-participant fees. Custodial fees, investment fees, and financial professional and TPA fees (if applicable) are additional.

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Other 401(k) plans may increase recordkeeping fees to business owners as the total account balances increase. not with the simply retirement by principal ® 401(k) plan. no guessing and no changes as your employees contribute. it’s a predictable model you can plan for..

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Simply Retirement by Principal ® combines more than 75 years of retirement expertise from Principal ® * with the digital technology and services of Ubiquity Retirement + Savings ® . We’ve come together to help make retirement plans a reality for more small businesses.

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What are the tax benefits for starting a new 401(k) plan?

A new enhancement was made to the tax credits intended to help cover the costs for small employers that choose to offer new defined contribution plans. Small employers with 50 or fewer employees can now count 100% (maximum $5,000 a year) of their qualified plan expenses toward the tax credit calculation, allowing more employers the ability to maximize the  tax credit.

What is a 401(k) plan, and how does it compare?

401(k) plans allow employees to set aside a portion of their pay, typically before taxes. Employers can make contributions to the employees’ retirement plan if they choose.

What’s involved in managing a 401(k) plan?

The program automates many of the tasks required, but you’ll still have a few basic responsibilities as the plan administrator. Here’s what you need to know.

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With a Simply Retirement by Principal ® plan, you have access to Elevate by Principal, a powerful network, resource, and team of people in your corner. From data-driven insights to deep discounts on products and services you use everyday, Elevate by Principal can provide what you need to take your business to the next level.

Intended for plan sponsor use.

Start-up tax credit modification: Small employers with 50 or fewer employees may apply 100% of qualified start-up costs towards the tax credit formula (up to $5,000 per year).

• Applicable to small employers with 50 or fewer employees.
• For employees with 51-100 employees: The credit is phased out by reducing the amount of credit each year 2% for each employee in excess of 50.

1st and 2nd year = 100%, 3rd year = 75%, 4th year = 50%, 5th year = 25%, 6th year = 0%

No contributions may be counted for employees with wages in excess of $100,000 (inflation adjusted). If taking advantage of this tax credit, employer contributions may not also be counted towards “start-up costs” in the start-up tax credit calculation.

*Recordkeeping-fee: Pricing shown applies when working with a TPA. Bundled pricing is a $500 initial setup fee, then $185 per month. Fees paid by the business owner are billed quarterly. Fees paid by participants are deducted monthly from participant accounts. Participant fees are charged if there is a $100 account balance, regardless of whether the participant is active or inactive. Custodial and investment fees are charged against participating employees’ accounts (those vary by investment and range from 0.03% - 0.95%, as of March 31, 2024). If the business owner chooses to work with a financial professional and/or TPA, their fees are also additional and may be billed to the business owner. Financial professional fees may be deducted from participant accounts.

*What’s included: Plan costs are billed quarterly. Custodial and investment fees are charged against participating employees’ accounts (those vary by investment and range from 0.03% to 0.95%, as of March 31, 2024). If the business owner chooses to work with a financial professional and/or TPA, their fees are separate and may be billed to the business owner. Financial professional fees may be deducted from participant accounts.

*Principal: As of March 31, 2024

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The Best Retirement Plan Options for Small Business Owners 2024

Regardless of their size, small businesses have many options for employee retirement plans they can offer as part of their benefits package.

Table of Contents

What are employee retirement plans  .

Employee retirement plans help provide workers with income after they retire. These are viewed as a form of workplace benefit, and there are various ways that employers might structure their retirement plans and contribute to them on behalf of their employees. 

Editor’s note: Looking for the right employee retirement plan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Choosing the right retirement plan for your small business starts with researching all of the options available to you and your employees. Analyze who your employees are and what retirement plan options make the most sense for them, then choose one that aligns with your small business needs and values.

What are the types of retirement plan types? 

Employers have options when it comes to offering retirement plans to their workers based on the size of their business, employees’ needs and other considerations. Here, we take a look at the various plans available.

Several different types of small business retirement plans are available and plan providers have affordable, accessible options designed for even very small businesses. There are also some tax advantages that can offset the expense of sponsoring a small business retirement plan.

Traditional 401(k)

This is perhaps the best-known type of retirement plan. The difference between individual retirement account (IRA) and 401(k) plans is that 401(k) plans allow employees to contribute a higher dollar amount to their accounts, to take out loans from their retirement savings and, usually, a choice of pretax and Roth contributions:

• Cost per employee: Varies by plan provider. Look for all-inclusive providers that work with small businesses. Most charge a setup fee, monthly (or annual) administrative and per-participant fees and an investment or advisory fee. Plan participants pay exchange-traded fund (ETF) and mutual fund expense ratios as well as fund trades.
• Contribution structure: Employee participation is optional and often allows them to make pretax contributions through salary deferrals or after-tax Roth contributions. Employer contributions are optional, but you can set a vesting schedule that allows you to reclaim a percentage of the business’ contributions if an employee leaves the company before a set time.
• Roth 401(k) vs. traditional 401(k): A Roth 401(k) is a variation of the traditional 401(k) that allows plan participants to make after-tax contributions rather than pretax salary deferrals. After-tax contributions aren’t deductible since employees have already paid income tax on them. The advantage is that their money grows tax-free, so it isn’t taxed when they withdraw it.
• 2023 contribution limits: $22,500 for employees or $30,000 for employees age 50 and older. Employers can contribute up to 25% of the employee’s compensation, but the contribution totals ― employee and employer contributions ― must not exceed $66,000 or $73,500 for employees age 50 and older who make catch-up contributions. This plan is subject to nondiscrimination testing, which ensures it doesn’t favor highly compensated employees. As such, the business owner and high-earning employees may need to reduce their contributions to pass this test.
• Type of filing: You’re required to submit an Annual Return/Report of Employee Benefit Plan ― also known as IRS Form 5500 ― with this plan. As mentioned in the point above, this plan requires nondiscrimination testing.
• Ideal for established small businesses that wish to use a vesting schedule to encourage talent retention or prefer not to match or contribute to employee retirement accounts.

Safe harbor 401(k)

A safe harbor 401(k) is a variation of the traditional 401(k) plan that isn’t subject to an annual IRS nondiscrimination test. This allows the business owner and highly compensated employees to make maximum contributions to their retirement accounts. However, employers are required to match or contribute to employee retirement accounts and these funds are immediately 100% vested:

• Cost per employee: Varies by plan provider, but those offering all-inclusive plans for small businesses tend to be less expensive. Most charge a setup fee, monthly (or annual) administrative and per-participant fees and an investment or advisory fee. Plan participants pay ETF and mutual fund expense ratios, as well as fund trades.
• Basic match where employee matches 100 percent of the first 3 percent of deferred compensation and a 50 percent match on the next 2 percent.
• Enhanced match is when the company matches or exceeds the basic option. Typically, the employer gives a 100 percent match on the first 4 percent of deferred compensation.
• Nonelective where the company contributes 3% or more of an employee’s compensation whether or not the worker opts for elective deferrals. 
• 2023 contribution limits: $22,500 for employees or $30,000 for employees age 50 and older. Employers can contribute up to 25% of the employee’s compensation, but the total contribution, including employee and employer contributions, must not exceed $66,000 or $73,500 for employees age 50 and older who make catch-up contributions.
• Type of filing: As with the traditional 401(k), you’re required to submit IRS Form 5500 with this plan. Nondiscrimination testing isn’t required.
• Ideal for small businesses whose owners and high-earning employees want to invest aggressively in their retirement accounts.

Solo 401(k)

A solo 401(k) is a retirement savings plan designed for self-employed individuals who want to maximize their retirement contributions. It’s also referred to as an individual 401(k) or i401(k). Only the business owner and their spouse may participate in this type of plan; business owners with employees do not qualify for it:

• Cost: Fees vary, depending on the plan provider. Some charge a setup fee and have monthly or annual administrative and advisory fees. Others don’t charge these fees but instead have ETF and mutual fund expense ratios and trading commissions. Some retirement plan providers require a minimum opening investment and charge service fees if your account balance doesn’t meet a certain threshold.
• Contribution structure: You can contribute to this account as both the employee and employer. A Roth option for the employee contribution may be available, depending on the plan provider.
• 2023 contribution limits: $22,500 for the employee contribution, plus a $7,500 catch-up contribution if you’re age 50 or over. The employer contribution limit is up to 25% of your compensation. However, the total defined contribution limit, which includes both employee and employer contributions, is $66,000 for 2023, not counting catch-up contributions.
• Type of filing: If your plan has $250,000 or more in assets, you must submit IRS Form 5500-SF or 5500-EZ. Because you don’t have employees, nondiscrimination tests are not required.
• Ideal for sole proprietors who wish to take full advantage of retirement savings opportunities.

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a small business retirement plan that is easy to set up and has low contribution and matching requirements for employers. It allows employees to contribute more than they could with traditional or Roth IRAs:

• Cost per employee: There are usually no setup fees for this type of plan. Participating employees pay fund trades and expense ratios. Depending on the plan provider, there may be account service or maintenance fees.
• Contribution structure: Employees have the option of contributing to their accounts through elective deferrals. There is no Roth option for this plan. Employers must either contribute 2% to all employee accounts or match 3% of employee contributions. Contributions are 100% vested. Self-employed people who choose this plan can contribute to it as both employee and employer.
• 2023 contribution limit: $15,500 for employees; employees who are 50 and older can make an extra $3500 catch-up contribution. Employers aren’t allowed to exceed the 2% contribution or 3% match.
• Type of filing: This plan doesn’t require employers to file IRS Form 5500 or submit to nondiscrimination testing.
• Ideal for small businesses with 100 or fewer employees that want to keep their costs low and allow employee contributions.

A Simplified Employee Pension IRA (SEP IRA) is a retirement savings plan that’s inexpensive for employers to establish and easy to maintain. Employer contributions aren’t required annually, making it a good option for business owners who only want to contribute during high-profit years:

• Cost per employee: There are usually no setup fees for this type of plan. Plan participants pay trading commissions and fund expense ratios. Depending on the plan provider, there may be account service or maintenance fees.
• Contribution structure: Only employers may contribute to employee accounts. Contributions must be the same percentage of compensation for every participant. Employers aren’t required to contribute to accounts every year. Contributions are immediately 100% vested.
• 2023 contribution limits: Up to $66,000 or 25% of compensation, whichever is less. There are no catch-up contributions allowed for this plan type.
• Type of filing: The plan doesn’t require employers to file IRS Form 5500 or submit to nondiscrimination testing.
• Ideal for businesses of all sizes that want a plan that is easy to set up and maintain and allows employers the flexibility of choosing which years they make contributions to employee accounts.

Traditional IRAs

IRAs are the simplest type of retirement accounts to set up. Furthermore, nearly everyone is eligible ― freelancers, business owners and even people who already have employer-sponsored retirement plans. This type of plan is a popular option for people who have 401(k) assets from previous jobs that they need to roll over into a new retirement account. There’s usually no cost to set up an IRA, but you will pay trading fees and fund expense ratios.

This type of retirement account allows you to make annual tax-deductible contributions, depending on your modified adjusted gross income and whether or not you have a workplace-sponsored account. Earnings on principal and interest accumulate on a tax-deferred basis:

• 2023 contribution limit: $6,500. If you’re age 50 or older, you can contribute up to $7000.
• Contribution rules: You can contribute to your account until age 70.5, at which time required minimum distributions (RMDs) apply. You can withdraw funds penalty-free at age 59.5. You must start taking distributions by April 1 of the year you turn 72. 
• Ideal for individuals who anticipate that their tax rates will be lower during retirement years, as this account allows you to defer taxes until you withdraw your money.

This type of retirement account differs from traditional IRAs in that contributions aren’t deductible. Instead, you’ve already paid income taxes on the money you invest, allowing interest to grow tax-free. It also has no age limits on contributions and has different withdrawal rules:

• 2023 contribution limits: $6,500. If you’re age 50 or older, you can make a $1,000 catch-up contribution.
• Contribution rules: There’s no age limit on contributions so, unlike with traditional IRAs, you can continue contributing to your account past age 70.5. In addition to waiting until you’re age 59.5 to withdraw your funds, you must have established the account at least five years before you make withdrawals. However, there are no RMDs during your lifetime.
• Ideal for individuals who expect higher tax rates during retirement years . Since Roth contributions have already been taxed, your money grows tax-free and there are no additional taxes to pay when you withdraw it.

As with all major financial decisions, consult your certified public accountant , tax advisor or financial advisor for retirement and investment advice specific to you and your business. The information in this article is general and shouldn’t be considered financial, legal or tax advice.

What are the best small business retirement plan options? 

Small businesses have a number of retirement plan options to consider. Here, we take a look at some of the best employee retirement plan options for small businesses.

USA 401k is a small, independent retirement benefits provider that offers services through a subsidiary of MassMutual. What sets them apart is their transparent pricing. ( See USA 401k review )

Paychex is an all-in-one human resources (HR) payroll and benefits solution that offers 401(k) and retirement services for businesses of all sizes. Small businesses can work with Paychex to build a customized plan based on their — and their employees’ needs. ( See Paychex Flex HR Software review )

ADP really stands out as the best employee retirement benefits provider for small businesses because of its comprehensive payroll, HR outsourcing and benefits services, which can all be integrated through the company’s SMARTSync Comprehensive Plan Automation. ( See ADP Employee Retirement review )

Human Interest

A dedicated employee retirement benefits provider that offers cost-effective and user-friendly services online. Employers can choose from three plans — Essentials, Complete and Concierge. ( See our Human Interest Employee Retirement review )

Fidelity Investments

Fidelity provides a wide array of services, including individual retirement accounts and employer-sponsored retirement plans. 

A relatively new company that has a particularly strong safe harbor 401(k) offering. 

One of the oldest and largest mutual fund companies in the world, Vanguard offers a wide range of mutual funds and ETFs for account holders to choose from. 

What are the retirement plan tax advantages for small businesses?

The government offers the Retirement Plans Startup Costs Tax Credit to help small businesses offer retirement plans to their employees. It allows you to deduct up to 50 percent or $500 of plan startup and administration costs for the first three years of your plan.

If you match or make contributions to employee accounts, that money is also tax deductible. It allows you to contribute to your own retirement savings plan and, like your employees, you have the option of elective deferrals that may allow you to lower your income tax bracket. Also, depending on your income, you may qualify for the Saver’s Credit .

Additional tax credits may soon be available as federal lawmakers seek to make retirement plans more accessible and affordable for small business owners. For example, one bill under consideration would provide a tax credit to small businesses that auto-enroll their workers in their retirement plans. [Related article: Retirement Savings Rules See Big Changes: What You Need to Know ]

Do small businesses have to offer employee retirement plans?

The short answer is no. No private businesses in the United States are required to offer retirement plans to their employees. Many companies offer retirement plans as part of benefits packages to help attract and retain talent. For smaller companies, offering retirement plans may help bring in new workers, but it also may be the right thing to do for your existing employees.

Depending on your situation, it’s important to consider how retirement plans will impact your business and its employees. Benefits like retirement plan options or healthcare can be a major tipping point for employees who are waffling between staying loyal to your company and taking their talents elsewhere. 

What type of employee retirement plan should I choose? 

If you have employees and want …

• To set a vesting schedule that encourages employee retainment, check out a traditional 401(k) .
• To avoid nondiscrimination testing, so you and your highly compensated employees can aggressively save for retirement, think about a safe harbor 401(k) .
• A simple plan that allows your employees to make contributions, look into a SIMPLE IRA .
• To choose which years you contribute to employee retirement accounts ― for example, if your business profits fluctuate from year to year ― consider a SEP IRA .

If you’re a sole proprietor and want …

• To save as much money for retirement as allowed and contribute as both an employee and the employer, look into a solo 401(k) .
• To save as much money for retirement as allowed, but only want to make employer contributions, check out a SEP IRA .
• For a simple retirement plan that’s easy to set up, consider a traditional IRA .

For a simple after-tax plan that allows your money to grow tax-free, look into a Roth IRA .

Offer a benefit that keeps on giving

Small businesses can earn big benefits from offering employees retirement plan options to ensure a comfortable retirement. With many plan options available, you’re sure to find one that meets your company’s ― and your employees’ needs. 

Linda Pophal contributed to this article.

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• Help When You Want It Find answers to common questions  at Merrill Schedule an appointment  with Merrill To find the small business retirement plan that works for you, contact: [email protected]

Give your business an edge with competitive retirement benefits

A small business 401(k) footnote  10 is a streamlined and affordable retirement plan designed with small business owners and their employees in mind., small business 401(k) features, to learn more about how a small business 401(k) can benefit you and your business, select any of the links below., discover affordable and straightforward pricing, pricing for your business footnote  6, pricing for individuals with a balance footnote  7, what's a key difference between a small business 401(k) and a simple ira, get started with a small business 401(k) in 3 easy steps, answer a few questions, review your proposal, purchase your plan, explore all plans available for small business, frequently asked questions, what types of businesses can set up a small business 401(k), what are the potential tax benefits of a 401(k), how much can employers contribute annually, how much can employees contribute annually, does my business have to contribute to employee accounts, what is a safe harbor plan, how much does it cost to set up and administer a small business 401(k) for my company, what is the difference between roth and traditional 401(k) contributions.

• The basic difference between Roth and traditional 401(k) contributions is when taxes are paid out. For Roth contributions, federal taxes are due in the same year you contribute. When you take a qualified withdrawal from your 401(k), earnings gained on top of the Roth contributions you made will be tax free. A qualified withdrawal for Roth contributions is one that is made at least five years after the year of your first designated Roth contribution (counting the first year as part of the five) and is made on or after attainment of age 59½, disability, or death. IRS Retirement topics, Designated Roth Account  popup State income tax laws vary, and we recommend consulting with a tax professional to determine how your state treats Roth distributions from qualified plans (which include 401(k) plans).
• Traditional 401(k) contributions do not require taxes to be paid at the same time you contribute. For traditional 401(k) contributions, taxes on contributions and earnings are due when withdrawn. Consult with a tax professional to determine further requirements, if any, on your 401(k) withdrawal for traditional 401(k) contributions.

When are contributions fully vested?

What investment choices are offered, can participants withdraw funds or take loans from their 401(k)s, what is the plan establishment deadline, is irs reporting required, when are the plan purchase deadlines.

• New, start-up plan — August 8th
• Transfer plan — July 24th
• New, start-up plan — November 8th
• Transfer plan — October 24th

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF) .

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What are small business retirement plans?

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Small business owners have many critical priorities, such as growing their business, making a profit, managing taxes, and attracting and rewarding valuable employees. A small business retirement plan may help them achieve these objectives. Most small business plans are easier to start up, less expensive to run, and simpler to manage than a typical employer sponsored qualified retirement.

What is a small business retirement plan? A small business plan is a tax-deferred plan that offers retirement savings for self-employed individuals and their spouses, or small business owners. Some define a small business owner as a business owner with less than 10 employees, but one of the plans we offer - a SIMPLE IRA - can be used as long as you have less than 100 employees. One of the advantages of a small business plan is that business owners can deduct contributions made to their own accounts, as well as contributions made on behalf of employees, as a business expense.

Who is eligible to set up a small business retirement plan? Anyone who has earned income from self-employment can establish a small business retirement plan. Examples include consultants, independent contractors, board members, store owners, sales representatives with 1099-MISC income, doctors, attorneys, real estate agents, people with home based businesses, and many more. Whether self-employed income is the primary income source, or an individual just has a small business on the side and continues to work for someone else, they are eligible to set up a small business retirement plan, using the income derived from being their own boss.

Three small business and self-employed retirement plans include: Individual 401(k) which offers a Roth 401(k) feature, SEP IRA, and a SIMPLE IRA.

Individual 401(k)

An Individual 401(k) plan is designed to maximize contributions for self-employed individuals and spouses, and it’s less complex and less costly to maintain than a conventional 401(k) plan. The first thing to understand about an Individual 401(k) is that contributions can come from two sources.

Owner's salary deferral

How this works is that the business owner defers, or foregoes, a percentage or dollar amount of their salary up to a maximum of $22,500 for 2023 ($23,000 for 2024). If over age 50, they can defer an additional $7,500 for 2023 and 2024, for a total of $30,000 for 2023 (and $30,500 for 2024) into the plan. Salary deferrals can be used to reduce income and thus tax liability now. Alternatively, they can designate all or a portion of salary deferrals as an Individual Roth 401(k) contribution if the plan permits. With a Roth contribution, the contribution cannot be deducted now, but the business owner can take tax-free qualified distributions later if certain requirements are met. A qualified distribution is generally a distribution that is made after a 5 year holding period and after age 59½.

Company contribution

The second part of the contribution is the company contribution, also called a profit sharing contribution. This piece can be as much as 25% of your income if the business is incorporated (or if the business owners receives a W-2), or 20% of income if they are a sole proprietor and file a Schedule C. The total of the two contribution pieces (salary deferral plus profit sharing) can total up to as much as $66,000 for 2023 ($69,000 for 2024). These limits are increased by 7,500 for 2023 and 2024 if age 50 or over. This plan allows a business owner to put away quite a large sum for retirement.

A traditional individual 401(k) and Roth Individual 401(k) can also offer a loan feature, giving the opportunity to take a loan in the event of a setback. Generally, 50% of the vested account balance, up to $50,000 can be borrowed if permitted under the plan. 

If there are any full or part-time employees other than a spouse, a small business owner is not able to establish this plan.

Another popular plan for small businesses is a SEP IRA . A SEP IRA is very similar to a Traditional IRA, except it has higher discretionary contribution limits. The contribution limits for SEP IRAs   are the lesser of (i) $66,000 in 2023/$69,000 in 2024 or (ii) 25% of employee compensation (or 20% of net earnings from self-employment), with compensation taken into account capped at $330,000 in 2023/$345,000 in 2024. The contributions made to a SEP IRA are generally not mandatory. Employers are generally able to set aside from 0 – 25% each year. Therefore, if they have a good year, they can generally put away the maximum amount. If on the other hand, they didn’t have as successful of a year as hoped, they can put away a small percentage or even skip a year of contributing altogether. Keep in mind that only employers can make SEP IRA contributions.  So whatever percentage of salary a business owner contributes to their own SEP IRA, they must also contribute the same percentage of eligible employee’s salary into the eligible employee's SEP IRA accounts.

Business owners can let all employees participate in the SEP IRA or they can specify that a certain age and length of employment has to be met before contributions are made to employee accounts. The age limit cannot exceed 21 years old, the employment requirement is limited to 3 of the immediately preceding 5 years and received at least 750 in compensation (2023 and 2024) from the employer for the year. Once the employees exceed these requirements, business owners are obligated to contribute the same percentage of salary to their SEP IRAs as they contribute to their own account. This plan must be adopted by the business tax return filing deadline, plus extensions.

For employers who want employees to help fund their own retirement plan, they may be interested in a SIMPLRE IRA . A SIMPLE IRA is sometimes described as a mini- 401(k) plan, but it is only available for businesses with no more than 100 eligible employees. Contributions are made both by the employer and the employee.

Employee salary reduction contributions

Employees defer a percentage of their salary into the SIMPLE IRA, up to $15,500 for 2023 (or $16,000 for 2024) or, if age 50 or older, $19,000 for 2023 (or $19,500 for 2024). The salary deferral contributions are typically deducted from the paychecks of each participant during normal payroll. Effective for the 2024 tax year, the annual deferral limit is increasing to 110% of the 2024 SIMPLE IRA plan limit (as indexed) and the catch-up contribution limit at age 50 is increasing to 110% of the 2024 SIMPLE IRA plan limit (as indexed) in the case of an employer with no more than 25 employees. Employers with 26 to 100 employees are permitted to provide these higher deferral limits, provided that the employer either provides a 4% matching contribution or a 3% employer non-elective contribution (electing employer SIMPLE plan).

Employer contributions

Then the employer either matches contributions of employees that are participating in the plan, up to 3% (or 4% for electing employer SIMPLE plan) of salary, or can choose to provide a 2% (or 3% for electing employer SIMPLE plan) non-elective contribution to all eligible employees (the 2% non-elective contribution is subject to the compensation cap of $330,000 for 2023 or $345,000 for 2024), whether the employees participate in the salary deferral portion of the plan or not. Effective for the 2024 tax year, employers are permitted to make additional contributions to each participant in a uniform manner, provided the additional contribution does not exceed the lesser of 10% of a participant's compensation or $5,000 (as indexed).

One advantage of providing a 3% matching contribution is that the employer only contributes to those employees who elect make a salary reduction contribution. An advantage of the 2% non-elective contribution is that these contributions are subject to a compensation cap -- however they’ll have to contribute for all eligible employees even if they don’t participate in the salary deferral portion of the plan.

Two important things to know about SIMPLE IRAs are:

1. A vesting schedule cannot be imposed on the employer contribution, meaning that even if an employee leaves the company soon after they become eligible for an employer contribution, the money is still theirs to keep.

2. If the employees need to tap into their account within the first 2 years of funding, any withdrawals carry a hefty 25% tax penalty if the employees are under age 59 ½.

In general, the plan must be adopted by October 1 in order to make current year contributions.

The infograph below shows some options to help you find the small business retirement plan that may make sense for you.

Many business owners are too busy with the day to day details of running their business to think about planning for retirement. However, these plans are a way to help grow businesses and help employers retain and attract valuable employees.  An employer sponsored retirement plan is often one of the crucial benefits individuals ask about when considering a new employment offer. Additionally, some plans have loan features, giving the opportunity to make a loan in the event of a setback. Also, tax credits exist for small business owners who establish new plans. Another big benefit is that contributions made to the employer’s account, or to employee accounts, are tax-advantaged. These contributions reduce the business’ taxable income and offer tax-deferred growth potential for the participants. Plus, contribution limits to these plans are much higher than the standard Traditional and Roth IRA contribution limits. A small business employer can control how much they contribute to their own account and employee’s accounts, and in some situations, employers may be able to skip funding one year if the business didn’t do as well as hoped.

What to read next...

Incorporating social security into your retirement planning, looking to expand your financial knowledge.

Best Retirement Plans for Employees

Best retirement plans for self-employed individuals.

• Best Individual Retirement Accounts (IRAs)

Other Retirement Savings Options

• Why You Should Trust Us

Best Retirement Plans for 2024: Choosing the Right Path for Your Future

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Why Start Saving for Retirement Now?

Financial experts all agree: The sooner you start saving, the better. Retirement savings accounts offer long-term wealth-building features like compounding, tax advantages, and retirement-focused investment strategies. 

Compound interest allows you to earn interest on your interest. The longer your money grows, the faster it accumulates and the closer you are to achieving a financially secure retirement. Contributing a little here and there is better than not contributing at all. 

Moreover, retirement plans like IRAs and 401(k)s offer tax benefits. You can contribute pre-tax money to lower your taxable income today. Or you can contribute after-tax money for tax-free growth and withdrawals. 

Here are Business Insider's editors' top picks for the best retirement plans in 2024. 

401(k) Plans

401(k)s are popular retirement savings plans offered by for-profit companies. Employees can open a traditional 401(k) or a Roth 401(k). Traditional 401(k)s grow with pre-tax dollars, but Roth 401(k)s rely on after-tax contributions, just like with IRAs.

Employees can contribute up to $23,000 in 2024, and individuals age 50 and older can contribute additional "catch-up" contributions of $7,500. 

Many 401(k)s offer employer-matching contributions. Your employer matches up to a certain limit for every dollar you put into your account. This is generally considered "free money" toward your retirement. For instance, if you make $50,000 annually, and your company matches 50% of your 401(k) contributions up to 5% of your salary, you would need to contribute $2,500 into your account to receive the full match amount. Your employer would then contribute an additional $1,250 a year.

403(b) Plans

403(b)s, or tax-sheltered annuities, are retirement plans for public school employees, tax-exempt organizations, churches, and other nonprofit companies. Similar to a 401(k), 403(b)s may offer the benefit of an employer match. You can contribute pre-tax or after-tax money. 

If you're under 50, you can contribute up to $23,000 in 2024. Employees 50 and up can contribute an additional $7,500. In addition to pre-tax and after-tax contributions, you can contribute to your 403(b) by allowing your employer to withhold money from your paycheck to deposit into the account.

Thrift Savings Plans

Thrift savings plans (TSPs) are retirement accounts for federal and uniformed services employees. Like 401(k)s, these plans let you contribute pre- or after-tax dollars. But, unlike many 401(k) employer matches, most TSPs offer a full 5% contribution match. Your employer will match your contributions up to 5% of your salary.

The annual contribution limit for 2024 is $23,000. The catch-up contribution limit is $7,500. 

457(b) plans are retirement savings accounts offered by certain state and local governments and tax-exempt organizations. Like 403(b)s, you can contribute to your 457(b) plan by asking your employer to withhold a portion of your paycheck and deposit it in your retirement plan. Some employers allow you to make Roth contributions. 

The annual contribution limit for 2024 is $23,000. The catch-up contribution limit is $7,500. Folks 50 and older can contribute up to the annual additions limit, currently $69,000. 

Pension Plans

Pension plans are retirement plans fully funded by your employer, who are required to make regular contributions toward your retirement. However, depending on the plan's terms, you may not have control over how the money is invested. 

There are two main types of pension plans: the defined contribution plan and the defined benefit plan. 401(k)s are technically considered defined-contribution pension plans, and your employer is not responsible if your investments perform poorly.

Traditional pension plans are defined benefit plans (plans with fixed, pre-established benefits). Employers are liable to provide retirement funds for a certain dollar amount, calculated based on employee earnings and employment years.

Solo 401(k)

Solo 401(k)s are an option for business owners who work for themselves and have no employees. They can contribute as both an employer and employee (and spouses of business owners may be able to contribute as well), meaning they can contribute twice as much. You can make pre- or post-tax (Roth) contributions to your account. 

As an employee, you can defer up to $23,000 of your self-employed income in 2024. If you're 50 or older, you can make an additional $7,500 catch-up contribution. As an employer, you can contribute up to $23,000, plus the catch-up contribution if you're 50 or older. The total contribution limit is $76,500. 

Simplified employee pension (SEP) IRAs are retirement vehicles managed by small businesses or self-employed individuals. According to the IRS, employees (including self-employed individuals) are eligible if they are 21 years old, have worked for the employer for at least three of the last five years, and have made a minimum of $750. 

SEP IRAs also require that all contributions to the plan are 100% vested. This means that each employee holds immediate and complete ownership over all contributions to their account, including any employer match. You can contribute up to $69,000 or 25% of your employee's compensation 2024.

Vesting protects employees against financial loss. For instance, according to the IRS, an employer can forfeit amounts of an employee's account balance that isn't fully vested if that employee hasn't worked more than 500 hours in a year for five years.

SIMPLE IRAs are for self-employed individuals or small businesses with 100 employees or less. According to the IRS, these retirement plans require employers to match each employee's contributions on a dollar-for-dollar basis up to 3% of the employee's salary.

To qualify, employees (and self-employed individuals) must have made at least $5,000 in the last two years and expect to receive that amount during the current year. But once you meet this requirement, you'll be 100% vested in all your SIMPLE IRA's earnings, meaning you have immediate ownership over your and your employer's contributions. 

Employees can contribute up to $16,000 in 2024. You can also add a catch-up contribution of $3,500 if you're 50 or older.

Payroll Deduction IRAs

Small businesses and self-employed people can set up employee IRAs even simpler. With payroll deduction IRAs, businesses delegate most of the hard work to banks, insurance companies, and other financial institutions.

After determining which institutions their employer has partnered with, employees can set up payroll deductions with those institutions to fund their IRAs. These accounts are generally best for employees who don't have access to other employer-sponsored retirement plans like 401(k)s and 457(b)s.

For 2024, you can contribute up to $7,000 in annual contributions and up to $1,000 in annual catch-up contributions for employees aged 50 or older. 

Best Individual Retirement Arrangements (IRAs)

One of the most appealing components of independent retirement plans like IRAs is that you can open one as long as you've got taxable (earned) income. And even if you have an employer-sponsored retirement account, you can usually set up a traditional IRA, Roth IRA, and other independent retirement accounts.

Traditional IRA

Traditional IRAs let you save with pre-tax contributions toward your retirement savings. You'll pay tax when you withdraw during retirement. Traditional IRAs are recommended for higher-income workers who prefer to receive a tax deduction benefit now rather than later.

The 2024 contribution limit is $7,000, with up to $1,000 in catch-up contributions.

Roth IRAs are funded by after-tax dollars, meaning you pay taxes on your contributions now and make tax-free withdrawals later. As long as you're eligible, experts recommend Roth IRAs for early-career workers who expect to be in a higher tax bracket when they withdraw. Traditional and Roth IRAs share the same contribution limits: $7,000 in 2024, with up to $1,000 in catch-up contributions.

If you want to open one of the best Roth IRAs , single filers can only contribute the maximum amount in 2024 if their modified adjusted gross income (MAGI) is less than $146,000. Married couples must earn less than $230,000 annually to contribute the full amount in 2024. You can still contribute less if you earn a little more, though. 

You can find your MAGI by calculating your gross (before tax) income and subtracting any tax deductions from that amount to get your adjusted gross income (AGI), then adding back certain allowable deductions.

Spousal IRAs

There's also an option for married couples where one spouse doesn't earn taxable income. Spousal IRAs allow both spouses to contribute to a separate IRA as long as one spouse is employed and earns taxable income. This account allows the nonworking spouse to fund their own IRA. 

In 2024, each can contribute $7,000 (or $8,000 if they are 50 or older) for up to $16,000 annually.

Rollover IRAs

The best rollover IRAs let you convert your existing employer-sponsored retirement plan into an IRA, something experts generally recommend doing when you leave a job for a few reasons: primarily because you have more control over the investment options in an IRA than in a 401(k), and also because it's easier to consolidate your accounts for record-keeping.

Many online brokerages and financial institutions offer rollover IRAs; some will even pay you to transfer your employer-sponsored plan to an IRA.

Self-Directed IRAs (SDIRAs)

You can fund a self-directed IRA using traditional or Roth contributions ($7,000 and contribution limits in 2024, plus another $1,000 for catch-up contributions). But the difference between these accounts is mainly one of account custody and investment choices.

Unlike traditional and Roth IRAs, the IRS requires that all SDIRAs have a certified custodian or trustee who manages the account. These third parties handle the setup process and administrative duties of the IRA (e.g., executing transactions and assisting with account maintenance).

SDIRAs also give investors access to a wider range of investment options. With traditional and Roth IRAs, you're limited to mutual funds, ETFs, stocks, and other traditional investments. But, SDIRAs allow you to invest in alternative assets like real estate, precious metals, and cryptocurrencies .

Nondeductible IRAs

Nondeductible IRAs are for people who earn too much to get the full tax benefits of an IRA. Contributions for these accounts aren't tax deductible, meaning you'll fund your IRA with post-tax dollars like a Roth IRA. The difference is that you'll still have to pay taxes on any earnings or interest from the account once you withdraw at age 59 1/2.

Annuities are investment vehicles purchased from insurance companies at a premium. You'll receive periodic payouts during retirement once you purchase an annuity using pre-tax or after-tax dollars. Annuities offer a reliable income stream for retirees and reassurance they won't outlive their savings. 

The funds in an annuity can also be invested. Before you start receiving payouts, the investment gains grow tax-free, but you'll still be liable to pay income tax. Plus, annuities have limited liquidity and high fees that may diminish potential gains. 

Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are savings accounts designed to cover medical expenses but can double as retirement savings. Once you're 65, you can withdraw the funds from your HSA penalty-free for non-medical expenses. 

While an HSA isn't a great main retirement savings vehicle, it can be a great addition to a different long-term savings account. In addition to penalty-free withdrawals on qualifying expenses, HSAs are funded with pre-tax dollars and grow-tax-free. But you'll still be subject to income tax. 

In 2024, you can contribute up to $4,150 for self-coverage and $8,300 for family coverage. Folks 55 and older can contribute an additional $1,000 catch-up contribution. 

Choosing the Best Retirement Plan for You

If you're not a small-business owner or self-employed, the best retirement plan for you usually depends on your type of employer, marital status, and short- and long-term savings goals. 

However, for most employer-sponsored retirement accounts, you can decide whether to make pre-tax or post-tax (Roth) contributions to your account. Roth contributions are best for those who expect to pay more in taxes as they age, but you should consider pre-tax contributions if you don't mind paying taxes when you withdraw money from your account in retirement.

You can boost your retirement savings even more by opening a separate IRA in addition to your employer-sponsored plan (you can still save toward retirement with an IRA if you're unemployed).

FAQs About Retirement Plans

Your best retirement option depends on your income, employer, financial situation, time horizon, and goals. If you can access a retirement savings account through your employer, especially a pension or 401(k) plan, that is likely your best option. If not, a traditional or Roth IRA offers tax advantages, compounding power, and flexible investment options.

A traditional or Roth IRA may be a better retirement saving account than a 401(k) due to the low fees and flexibility. Although 401(k)s come with great benefits like an employer match, they have high fees that can eat away at gains. An IRA may be a better option if your employer is not covering those fees. 

A Roth IRA may be the better option, depending on your situation. In most cases, a 401(k) is the stronger retirement account due to the convenience of automatic payroll deduction and the additional benefit of an employer match. However, Roth IRAs can double as emergency funds. A Roth IRA may be better if you're looking for increased flexibility and Roth tax benefits. 

Why You Should Trust Us: Our Expert Panel For The Best Retirement Plans

We interviewed the following investing experts to see what they had to say about retirement savings plans. 

• Sandra Cho , RIA, wealth manager, and CEO of Pointwealth Capital Management
• Tessa Campbell , Investment and retirement reporter at Personal Finance Insider

What are the advantages/disadvantages of investing in a retirement plan?

Sandra Cho:

"The main advantage is the tax implications of the account. Depending on the account, taxes will either be deferred or not included at all. For employer-sponsored retirement plans like 401(k)s, contributions to the plan are made with pre-tax funds, and the account grows tax-deferred. Taxes are then owed upon withdrawal.

"Roth IRAs, on the other hand, are contributed to with post-tax funds but grow tax-free. Both should be included in an investor's portfolio. Another advantage is that 401(k)s often have an employer matching component. That is, an employer will match your contributions up to a certain point (usually around 3% of your salary). 

"The disadvantage is that retirement accounts have a max contribution limit. Another disadvantage is that these funds cannot be used until age 59 1/2. For younger investors, that can be a long time wait."

Tessa Campbell: 

"Tax benefits and compound interest are two of the major advantages of contribution to a retirement savings plan like a 401(k) or individual IRA. Depending on the kind of plan you open (traditional or Roth), you can benefit from contributions after- or post-tax dollars. In addition, some 401(k) plans are eligible for employer-sponsored matches, which are essentially free money.

"The disadvantage of a retirement plan is that you won't be able to access the funds in your account penalty-free until you're at least 59 1/2 years old. Unless there are no other options, early withdraws from a retirement savings plan isn't advised."

Who should consider opening a retirement plan?

"Every individual should be investing through a retirement plan if they have the financial capability to. At the minimum, investors should try to contribute up to the matching amount for their 401(k) and the maximum amount for their Roth IRA. The growth in these funds compounds over time, helping to enhance the long-term return."

Tessa Campbell:

"I can't think of a single person that wouldn't benefit from a retirement savings plan, other than maybe someone that is already well into retirement. Although some younger individuals don't feel the need to start contributing quite yet, it's actually better to open an account as soon as possible and take advantage of compound interest growth capabilities."

Is there any advice you'd offer someone who's considering opening a retirement plan?

"I would advise them to work with a financial advisor or trusted professional. This will give them insight into where they should be investing their money, whether that be a 401(k), Roth IRA, or another vehicle. There are plenty of people and sources out there who provide important information and can help you create a strong financial future."

"Don't contribute huge portions of your salary if it doesn't make sense with your budget. While contributing to a retirement savings plan is important, you must still afford your monthly expenses and pay down an existing debt. If you're having trouble establishing a reasonable budget, consult a financial advisor or planner for professional help."

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Individual 401(k) Plan: Traditional and Roth

You can make substantial contributions toward your retirement while receiving many of the same benefits of a conventional 401(k). And as the owner, you can contribute both as the employer and an employee.

Who is eligible for an Individual 401(k) plan?

An Individual 401(k) plan is available to self-employed individuals and business owners, including sole proprietors, owner-only corporations, partnerships, and independent consultants with no employees other than a spouse.

What are the benefits of an Individual 401(k) plan?

Every Schwab account comes with one-on-one investment help and guidance. With this account, you'll also get:

• Higher potential contribution limits than SEP IRA and profit-sharing plans
• Ability to make profit-sharing contributions and salary deferrals
• Flexible annual contributions
• Retirement planning tools and resources
• 24/7 service and support

What are the tax implications of an Individual 401(k) plan?

Tax implications vary for traditional and Roth plans:

• Contributions to a traditional Individual 401(k) plan are generally tax deductible.
• Contributions to a Roth Individual 401(k) plan are after-tax salary deferrals.
• For a traditional Individual 401(k), earnings grow tax-deferred and assets are not taxed until they are withdrawn in retirement.
• Qualified Roth distributions are tax-free if you are over age 59½ and have held the account for over 5 years.

What are the pricing details for an Individual 401(k) plan?

There is no fee to open or maintain an account at Schwab.

• Minimum opening deposit: $0.
• $0 account open or maintenance fees. Other account fees, fund expenses, and brokerage commissions may apply. 1

Find out more about our fees and minimums .

Want to learn more about Schwab's Individual 401(k) plans?

Ready to get started.

Follow these steps to build, manage, and make contributions to your retirement plan.

Establish your Individual 401(k) plan.

Here are all the documents you'll need to set up your plan.

Note: To establish your plan, you will need an Employer Identification Number (EIN) or a Social Security Number (SSN) if a sole proprietor is acceptable.

Complete & return to Schwab

• Account Application
• Adoption Agreement
• Roth Individual 401(k) Rollover/Transfer Data Form

Documents for your records

• Pricing Guide
• Basic Plan Document

Manage your plan and start making contributions.

• Contribution Transmittal Form
• Summary Plan Description
• Elective Deferral Agreement : All participants, including the business owner(s), must complete this to indicate the elective deferral amount to have withheld from compensation.

Common questions

If you have a specific question that's not answered here, please call us at 866-855-6637 .

Plan accounts are funded with a combination of traditional and designated Roth salary deferrals and annual profit-sharing contributions to the traditional 401(k). Vesting is immediate, and participants can direct how contributions are invested. Individual 401(k) plans do not need to be funded annually.

Individuals may contribute up to $22,500 for 2023 ($30,000 if age 50 or older) and $23,000 for 2024 ($30,500 if age 50 or older). Employers may contribute up to 25% of compensation, up to the annual maximum of $66,000 for 2023 and $69,000 for 2024. Total contributions cannot exceed $66,000 for 2023 ($73,500 if age 50 or older and contributing the catch-up contribution amount) and $69,000 for 2024 ($76,500 if age 50 or older and contributing the catch-up contribution amount). Salary deferral catch-up limits are $7,500 for 2023 and 2024 (if age 50 or older).

Contributions to an Individual 401(k) can be higher than contributions to other types of retirement plans.

You can fund your account as both the employer and the employee with the following: Annual profit-sharing contributions of up to 25% of your compensation or 20% of your net self-employment income.

SECURE 2.0 Act allows business owners to both establish an Individual 401(k) and make retroactive employer contributions until tax filing deadline plus extensions. Unincorporated business owners have until tax filing deadline, excluding extensions, to make retroactive elective deferrals. Generally, if your business is incorporated, you must make your deferral contributions in the same tax year.

You'll need to file IRS Form 5500 annually when your plan assets reach or exceed $250,000, or when you terminate your plan.

You must have a triggering event—generally either termination of employment or retirement—to take a distribution.

Traditional Individual 401(k)

• Generally, all withdrawals are subject to taxes.
• Withdrawals before age 59½ may be subject to a 10% penalty.
• Distributions are subject to a mandatory 20% federal tax withholding, except for Required Minimum Distributions (RMDs), hardship withdrawals, certain qualified exceptions, and direct rollovers.
• If you own 5% or more of the business, you must begin taking RMDs annually, starting with the year you reach age 73. If you don't make withdrawals, you may be subject to a penalty.

Under SECURE 2.0, if you don't take your RMD by the IRS deadline, a 25% excise tax on insufficient or late RMD withdrawals applies. If the RMD is corrected timely, the penalty can be reduced to 10%. Follow the IRS guidelines and consult your tax advisor.

Roth Individual 401(k)

Qualified Distributions: Always tax-free.

• You can start making qualified distributions from a Roth 401(k) once you have satisfied two conditions: You are age 59½ or older, and you have met the five-year rule.

Non-Qualified Distributions: Earnings are generally subject to taxes.

• If you are under 59½ and/or have not met the 5-year rule, you may have to pay income tax, and if you are under 59½, you may incur a 10% penalty.
• Early withdrawals must include both contributions and earnings prorated based on the ratio of contributions to earnings in the account.
• Earnings are subject to a mandatory 20% federal tax withholding, except for hardship withdrawals, certain qualified exceptions, and direct rollovers.

SECURE 2.0 has eliminated RMDs for Roth 401(k) plans starting in 2024.

You may not take loans from your Individual 401(k) account.

Please refer to the IRS page on Individual 401(k) plans link for more information.

Additional small business resources

Explore other small business retirement plans, learn more about small business management, find a plan right for you with convenient tools.

If you're looking to move your self-employed 401(k), SEP IRA, or SIMPLE IRA to Fidelity, we can help. Call one of our retirement specialists at 800-544-5373.

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Self-employed 401(k)

Self-employed individuals, owner-only businesses and partnerships can save more for retirement through a 401(k) plan designed especially for you.

With Fidelity, you have no account fees and no minimums to open an account. 1 You'll get exceptional service as well as guidance from our team.

Compare all small-business plans

Plan details

Maintaining your plan, 1. key things to know, 2. open your plan and establish account, 3. contribute to your account.

Who is eligible	Self-employed individuals with no employees and owner-only businesses. The owner's spouse may participate in the plan if they are a compensated employee of the business.
Tax benefits	Tax-deferred growth, tax-deductible contributions, and pre-tax deferral contributions.
Who contributes	Funded by salary deferrals and employer contributions.
Contribution amounts	Employee Salary Deferral Contributions $23,000 $22,500 Employee Age 50 + catch-up $7,500 $7,500 Employer Profit Sharing Contribution $69,000 $66,000 Participants are eligible for withdrawals once a triggering event has been reached. Triggering events include reaching age 59 1/2, disability, and more. For a full list of triggering events see the One-Time Withdrawal — Defined Contribution Retirement Plan form (PDF) . A 10% early withdrawal penalty may apply if you are under age 59 1/2 and taking a withdrawal. Required minimum distributions start at age 73. A wide range of mutual funds, stocks, bonds, ETFs, and more. There is no opening cost, closing cost, or annual fee for Fidelity's self-employed 401(k). 1 $0 commission for online US stock, ETF, and options trades.* † An IRS filing is required when you terminate your plan and in some cases on an annual basis. Please see Maintaining Your Plan  for more information. The deadline to open a new plan is generally the tax filing deadline (including extensions) of the sponsoring business. Note: For partnerships and corporations that establish their plan after the business's year end, only the employer profit sharing contributions are permitted for the first year. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year. Online, by phone, by mail , through mobile check deposit, by transfer or EFT on Fidelity.com, or via a Billpay Service. Learn more To fully establish your plan, you'll also need to complete the self-employed 401(k) account application, adoption agreement and trust agreement. Please keep copies for your records, along with the Defined Contributions Retirement Basic Plan Document No. 04. Online plan establishment is available if you: Are establishing a new plan Are the plan administrator and plan participant Are a US Citizen Are naming your spouse as your primary beneficiary if you are married If you are not eligible for online establishment, you may: Review, download and save (or print for your records) the following document: Defined Contribution Retirement Basic Plan Document No. 04 (PDF) Review, download, complete, return to Fidelity, and keep a copy for your records the following forms: Self-employed 401(k) adopting agreement (PDF) Trust agreement (PDF) Self-employed 401(k) account application for yourself and each participating owner (including the business owner's spouse, if applicable). Once you've established your self-employed 401(k) plan and any new account(s), the next step is to contribute to your 401(k). You can use the Small Business Retirement Plan Contribution Calculator to calculate your annual contributions. You may contribute to your Self-employed 401(k) through the following methods, provided the plan administrator and plan participant for your plan are the same person: Contribute now via EFT on Fidelity.com Log In Required  or from a Fidelity non-retirement account in the name of the plan administrator and used for the business. Deposit checks on Fidelity's mobile app using mobile check deposit Send a contribution via an external Billpay service If the plan administrator and plan participant for your plan are NOT the same person, you may send a check with a completed 401(k) Contribution Remittance Form (PDF) . Please follow the instructions on the form. To set up salary deferral elections You can use the sample 401(k) Salary Reduction Agreement Form (PDF) . Fill it out yourself and have each participating owner (including the business owner's spouse, if applicable) fill it out as well. Keep this form for your records and do not forward to Fidelity. To roll over other plan assets If you already have a retirement savings plan for your business, you may be able to roll over or transfer existing plan assets to a Self-Employed 401(k). Consult with your tax advisor or benefits consultant prior to making a change to your retirement plan. Assets from the following plans may be eligible to be rolled over into a Self-Employed 401(k): Profit Sharing, Money Purchase, and 401(k) plans SEP IRAs and SARSEPs SIMPLE IRA accounts after two years of SIMPLE participation 403(b) and governmental 457(b) plans Traditional IRAs Call a retirement specialist at 800-544-5373 , and say "retirement representative," to get help with a rollover into a Fidelity Self-Employed 401(k). Contribution deadlines The deadline for self-employed individuals and owner-only businesses to make both the company profit sharing and employee salary deferral is the business's tax filing deadline, including extensions. For corporations and partnerships, in the year the plan is established, if it is established after the business's year end, only profit sharing contributions are allowed. In subsequent years, both company profit sharing and employee salary deferrals are permitted. For the year salary deferrals are to commence, generally participants (including self-employed individuals and spouses of owners if they are also participating employees) must make a written salary deferral election by the business's year end. Collapse all A Self-Employed 401(k) plan is a profit-sharing plan with a salary deferral arrangement, qualified under Internal Revenue Code 401. Eligibility A self-employed 401(k) plan may be appropriate for sole-proprietors and other small businesses who have no eligible employees other than owners and spouses of the owners. Individuals with corporations (Corp.), limited liability corporations (LLC), and partnerships may also be able to establish a self-employed 401(k), provided there are no common law employees of the business. In addition to the business owners, the owners' spouses may participate in the plan provided they are compensated employees of the business. If the company has common law employees this plan is not appropriate. This plan might not be appropriate if you have ownership interest in more than one business or are a participant in a company sponsored 401(k) or other salary deferral retirement plan. If you are looking for a plan that allows Roth salary deferral contributions, loans, or hardship withdrawals, this would not be an appropriate plan for your business as these features are not offered at this time. The plan administrator, who is typically the business owner, would be responsible for the administration of the plan, and is required to maintain and update, when needed, all plan records and documents pertaining to the plan. Contributions to and distributions from the plan are also the plan administrator's responsibility. In addition, the plan administrator is responsible for the tax filing that is required for some plans annually and all plans upon termination. Please see Maintaining Your Plan for more information. Account Opening If you're setting up a plan and opening an account for someone else or if you'd prefer not to submit documents digitally, please complete the documents below. You should review the plan documents, brokerage agreement and other materials to ensure this is right plan for you and your business. To open a Self-employed 401(k) plan, you'll need to complete the following documents: Self-Employed 401(k) Adoption Agreement (PDF) Self-Employed 401(k) account application (PDF) Trust Agreement (PDF) Complete, sign, and return the Adoption Agreement, the Trust agreement along with the original Account Application(s), to: Fidelity Investments PO Box 770001 Cincinnati, OH 45277-0036 Remember to keep copies of these documents for your own records. Note: For partnerships and corporations that establish their plan after the business's year end, only the employer profit sharing contributions are allowed for the first year. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year. A spouse, who is also a compensated employee of the business, may be added to the plan by using the Self-Employed 401(k) account application (PDF) . Contributions Contribute now on Fidelity.com  or on Fidelity's mobile app from an external bank account or from a Fidelity non-retirement account in the name of the plan administrator and used for the business. Send a contribution via an external Billpay service. By check via email using the Contribution remittance form (PDF) Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year. For the year that salary deferrals are to commence, generally participants (including self-employed individuals and spouses of owners (if they are also participating employees) must make a written salary deferral election by the business's year end. If you have an unincorporated business, you (and your spouse if they are an employee of the business) must make a written salary deferral election before the end of the year. Employees of incorporated businesses must make a written salary deferral election before they can begin deferring from paychecks and that must be before the end of the business’s tax year. You may use the sample 401(k) Salary Reduction Agreement Form (PDF) . Fill it out and have each participating owner (including the business owner's spouse, if applicable) complete a Salary Reduction Agreement Form if they will be making salary deferral contributions to the plan. Please keep this form for your own records. There is no need to send a copy to Fidelity. Individuals may elect a salary deferral amount up to $22,500 for 2023 and $23,000 for 2024. Employers may contribute a profit-sharing amount up to 25% of compensation, with the maximum allowed combined employer and salary deferral contribution amount of $66,000 for 2023 and $69,000 for 2024. For participants aged 50 or older, additional salary deferral catch-up contributions are allowed of $7,500 for 2023 and 2024. Investments You can select from a wide range of investment options. These include Fidelity and non-Fidelity mutual funds along with stocks, bonds, ETFs, and CDs. Withdrawals Participants are eligible for withdrawals once a triggering event has been reached. Triggering events include reaching age 59½, disability, and more. For a full list of triggering events see the One-Time Withdrawal — Defined Contribution Retirement Plan form (PDF) . If you are under age 59½ and are taking a distribution, a 10% early withdrawal penalty from the IRS will apply. A 20% mandatory withholding would also apply to any distribution that is an eligible rollover distribution. Required Minimum Distributions (RMDs) must begin at age 73. To process a withdrawal from a Self-employed 401(k) plan, please use the  One-Time Withdrawal - Defined Contribution Retirement Plan (PDF) form. The plan administrator and the participant for the Self-employed 401(k) plan will both be required to review and authorize the distribution from the plan. Maintaining your self-employed 401(k) A self-employed 401(k) is a qualified retirement plan for a small business where the only employees are the owner(s) of the business and/ or the spouse(s) of the owner(s) if they work for the business. You shouldn't use this plan if you have any other employees. The self-employed 401(k), in some cases, can offer you the ability to make a larger contribution than other plans. However, it does have extensive administrative and tax reporting requirements that are your responsibility as the business owner and plan administrator. The list below does not cover all of your responsibilities. You may want to consult the IRS or a qualified tax advisor if you have additional questions. Employer and plan administrator responsibilities 1. establish your plan. The deadline to open a new plan is generally the tax filing deadline (including extensions) of the sponsoring business. Note: For partnerships and corporations that establish their plan after the business's year end, only the employer profit sharing contributions are allowed for the first year. The employer will establish the plan and name the plan administrator. Typically with the self-employed 401(k), the employer and the plan administrator are the same person, but you may name someone else as plan administrator if you choose. NOTE: The plan administrator is responsible for making contributions, authorizing withdrawals, preparing and filing the 5500 when necessary, and recording and keeping documents for the plan and updating those documents when necessary. 2. Notify eligible participants of their ability to defer pay into the plan Eligible participants who wish to defer salary must complete a salary reduction agreement form before the plan's year end. You may use the Salary Reduction Agreement form (PDF) and keep it in your own records. 3. Contribute to the participants' accounts by your business' tax filing deadline plus extensions Contribution type 2024 maximum 2023 maximum Employee Salary Deferral Contributions $23,000 $22,500 Employee Age 50 + catch-up $7,500 $7,500 Employer Profit Sharing Contribution $69,000 $66,000 Note: For corporations and partnerships, in the year the plan is established, if it is established after the business's year end, only profit sharing contributions are allowed. In subsequent years, both company profit sharing and employee salary deferrals are permitted. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year. As a plan sponsor, you can make contributions online via EFT from your bank or from an individual account on Fidelity.com . Mobile check deposit is available using the Fidelity's mobile app. Sole proprietors and partnerships may choose to use the Small Business Retirement Plan Contribution Calculator or the Self-Employed 401(k) Contribution Worksheet (PDF) to help calculate contributions. 4. Submit withdrawal requests when eligible Participants are eligible for a withdrawal once a triggering event occurs, such as turning age 59½, disability, or death. 10% early withdrawal penalty applies if you take a distribution before you're 59½ years old. Required minimum distributions (RMDs) start at age 73. There is a 20% mandatory federal withholding requirement for any withdrawal that is otherwise eligible to roll over to another plan. Withdrawals are done in writing using the Defined Contribution Retirement Plan One-Time Withdrawal form (PDF) . RMDs are generally required the year you turn 73 years of age for self-employed retirement plans, regardless of your working or participation status. You may set up recurring RMDs using the Defined Contribution Retirement Plan - Automatic Withdrawals form . 5. Abide by the Defined Contributions Retirement Plan document (PDF) This document contains the IRS-approved rules for your plan, as well as a definition of terms. Important Information regarding your Defined Contribution Retirement Plan: Participation in a 401(k) arrangement has changed with the passing of the SECURE Act and the SECURE Act 2.0. Beginning in 2021 the strictest age and service requirements that can be applied to an employee before the employee can participate in a 401(k) arrangement are: 1) at least 21 years old and the date completing 1 year (12 months) and no less than 1, 000 hours of service or 2) completing 3 consecutive years (36 months) of service with at least 500 hours of service or more each year provided the employee has attained age 21 by the close of the third year. The later could make 401(k) deferrals under the plan available to certain part-time employees starting 1/1/2024. Beginning in 2023, the SECURE Act 2.0 reduces the 3 year rule to 2 years. This could affect employees starting 1/1/2025. 6. Keep good records Starting with the forms you fill out to establish your plan, you'll want to keep a file of all relevant documents. This is not a comprehensive list, but among the important documents you will need are the plan document, the adoption agreement, records of all contributions and distributions, and any corrections of errors of operation, should they occur. Over the life of your self-employed 401(k), you may have reason to amend your adoption agreement. You should keep any older versions, along with the most current version. You may operate under different versions of the plan document, and you should keep a copy of all versions. Note: Fidelity doesn't retain any of these records on your behalf. 7. Update your records Any change in your plan that would alter information on your adoption agreement requires you to fill out a new adoption agreement, amending your plan. Substantial changes could result in a termination of the plan. If you are unsure whether you should amend or terminate your plan, please see your tax advisor. The plan document itself is updated for legislative changes every 6 years. Once Fidelity makes the changes to the plan document and they are approved by the IRS, you'll need to restate your plan. That will require an amended adoption agreement and a new plan document. 8. File the version of the 5500 that's appropriate for your plan Most owner-only plans can file the 5500EZ after plan assets exceed $250,000 but consult the IRS or your tax advisor if you are unsure of which version of the form applies to you. See Understanding form 5500 for more information and help with the filing. 9. Correct errors of operation The profit-sharing excess which cannot be removed from the plan. The IRS remedy is to "carry forward" the excess and apply it to a future year. Penalties may apply. An excess salary deferral, which must be removed by 4/15 after the year the excess was deferred. If you believe you have contributed more than you should, please consult your tax advisor. If you have questions, our retirement representatives may be able to help. Please call 1-800-544-5373 and say "Small Business Retirement plan." Please be aware, our representatives are not tax advisors. 10. Terminate your plan An active plan should have substantial and recurring contributions. If you are ready to terminate your plan please see the. Self-employed 401(k) Termination Guide (PDF) Money Purchase Termination Guide (PDF) Profit Sharing Termination Guide (PDF) 11. Provide Fee Disclosure information Your self-employed 401(k) should not be subject to Title 1 of ERISA because it does not cover employees beyond the owners of the business sponsoring the plan (or their spouses). However, you if operate a money purchase or profit sharing plan with common law employees you should be aware of the to keep up to date on fee disclosure regulations for plan sponsors and plan participants. Fidelity's Responsibility 1. provide the plan document. Defined Contributions Retirement Plan Document (PDF) is qualified and approved by the IRS and updated as required. 2. Maintain accounts Fidelity will provide the self-employed brokerage account(s) on our platform and the custodial agreement that outlines the rules and agreement for the account(s). Please see Establish Your Accounts . 3. Provide an Annual Valuation Statement (AVS) for the plan annually The AVS is available online and/or mailed annually in late April. A detailed explanation is on the Understanding form 5500 page. 4. Prepare tax forms for participants IRS form 1099-R for each year distributions or rollovers are processed out of an account. 5. Offer planning and investment guidance Choose your investments using our exceptional online tools and data. Our experienced representatives can also help you make an informed decision. For more information on how we can help you with investment management, planning, and advice, please see What We Offer . Helpful resources IRS 401(k) plan Fix-It Guide The Employee Plans Compliance Resolution System (EPCRS) I RS 401(k) plan additional resources IRS Website Understanding form 5500 More resources for your small business Start and grow your business. Explore what you need to know to become your own boss. An HSA for your small business See why a Fidelity HSA ® makes sense for small businesses and their employees. Benefits basics for self-employed workers A guide to health coverage, life insurance, and retirement plans. Have more questions? $0.00 commission applies to online U.S. equity trades, exchange-traded funds (ETFs), and options (+ $0.65 per contract fee) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (historically from $0.01 to $0.03 per $1,000 of principal). A limited number of ETFs are subject to a transaction-based service fee of $100. See full list of ETFs subject to this service fee here . There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. Other exclusions and conditions may apply. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Institutional ® are subject to different commission schedules. Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options . Supporting documentation for any claims, if applicable, will be furnished upon request. No account fees or minimums to open Fidelity retail IRA accounts. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs), and commissions, interest charges, and other expenses for transactions, may still apply. See Fidelity.com/commissions for further details. Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation. Fidelity Brokerage Services LLC, Member NYSE, SIPC , 900 Salem Street, Smithfield, RI 02917 Mutual Funds Fixed Income Active Trader Pro Investor Centers Online Trading Life Insurance & Long Term Care Small Business Retirement Plans Retirement Products Retirement Planning Charitable Giving FidSafe , (Opens in a new window) FINRA's BrokerCheck , (Opens in a new window) Health Savings Account Stay Connected News Releases About Fidelity International Terms of Use Accessibility Contact Us , (Opens in a new window) Disclosures , (Opens in a new window) Tax Advantages of Self-Employed 401(k)s A Self-Employed 401(k) may substantially reduce your current income taxes because generally, you can deduct the entire amount of your plan contributions from your taxable income each year. If your business is unincorporated, you can deduct contributions for yourself from your personal income. If your business is incorporated, you can generally deduct contributions as a business expense. Note: Fidelity also offers a Profit Sharing Plan which lets you contribute the same amount as a SEP-IRA. A Profit Sharing Plan may be better suited for your needs if you have multiple employees and want more restrictive eligibility requirements to participate in the plan. Please contact a Fidelity retirement representative at 800-544-5373 and select option 3 for more information. Contribution methods depend on the business structure, and include: Mobile check deposit through Fidelity's mobile app (account owner must log in) On Fidelity.com from an individual account or via Electronic funds transfer (ETF) from a personal bank account (generally only for sole proprietors/owner-only businesses.) By check, mailed or deposited at an investor center. View/download contribution remittance form. If funding multiple accounts with one check, please include a spreadsheet with the instructions to split between accounts By BillPay from a personal business account used for the business, or a business bank account. By phone through a representative from an established Fidelity account used primarily for the business. See all Self-employed 401(k) FAQs Important Information Virtual Assistant is Fidelity’s automated natural language search engine to help you find information on the Fidelity.com site. As with any search engine, we ask that you not input personal or account information. Information that you input is not stored or reviewed for any purpose other than to provide search results. Responses provided by the virtual assistant are to help you navigate Fidelity.com and, as with any Internet search engine, you should review the results carefully. Fidelity does not guarantee accuracy of results or suitability of information provided.   Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.   Fidelity does not provide legal or tax advice, and the information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation.  Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917  796549.1.0 You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. Financial Advisor Financial Planning Basics Updated: Jun 26, 2024, 4:51pm No matter the size or scope of your financial goals, a financial plan can help make them a reality. Financial planning is the process of looking at the current state of your finances and making a step-by-step plan to get it where you want it to be. That may mean devising a plan to become debt-free or figuring out how to save enough money for a down payment on a new home. This process can include many aspects of personal finance, including investing, debt repayment, building savings, planning for retirement and even purchasing insurance. Anyone can engage in financial planning—it’s not just for the wealthy. You can get started on making financial goals on your own, and if you choose, you can work with a financial professional to help devise the smartest plan to make those goals a reality. Advertisement Datalign advisory. Access to thousands of financial advisors. Match with a pre-screened financial advisor that is right for you. Connect with your match for a free, no-obligation call. 5 Steps to Create a Financial Plan A financial plan is devised of smaller goals or tasks that will help support you along your financial journey. Create a financial plan with these five steps: 1. Identify Your Financial Goals By identifying your financial goals, you’ll have a clear idea of what you need to accomplish to make them happen. Your goals should be realistic and actionable and include a timeline of when you want to accomplish them. Making a goal to pay off credit card debt by a certain date, for example, would be an appropriate financial goal that will set you up for success. 2. Set a Budget Having a clear picture of your finances will make it easier to achieve any financial goals. A budget can help you understand where your money is going each month. It can also help you identify where you may be overspending, giving you opportunities to cut back and allocate that money elsewhere. One of the easiest budgets to start with is the 50/30/20 budget . This budget plan allocates your monthly income into three buckets: mandatory expenses (50%), savings and debt repayment (20%) and discretionary spending (30%). This is just one of many types of budgeting plans out there. A budget should be a guide to help you understand your monthly finances and devise smaller goals that will bring you closer to your long-term financial goals. You likely won’t always follow your budget down to every single penny; keeping this in mind will help you stay on track, rather than get discouraged and give up on budgeting altogether. There are apps out there that make budgeting much easier by helping you visualize your spending and savings choices each month. Some budgeting apps even give you the option to enter your financial goals directly into their platform to help you stay on track. A fully featured budgeting app allows you to track spending, manage recurring bill payments, set savings goals and manage your monthly cash flow. 3. Build an Emergency Fund Building an emergency fund will help make sure that a financial emergency doesn’t become a catastrophic financial event. Experts usually recommend having six months’ worth of living expenses saved to cushion you, should the unfortunate unexpected happen, such as losing a job. But six months’ worth of money can be unattainable for those who may be struggling financially, or those living in tight financial means each month. You can start building an emergency fund by setting a few dollars aside each paycheck. You can start with a small fund goal of $100 to $200 to establish your fund. From there, you can create other smaller goals that will add up to a larger financial cushion. Some budgeting and savings apps also give you the option of rounding up to the nearest dollar in transactions and funnel that spare change toward your savings. 4. Reduce Your Debt Having to make debt payments each month means you’ll have less money to allocate toward your purchase goals. Plus, carrying credit card debt can be expensive; every month, you’re accruing interest on your balance, which can make it take longer to pay off. There are a variety of debt payoff methods out there. Two of the most popular include the debt snowball and debt avalanche methods . With the snowball method, you’ll pay off your smallest balance debts first, then make your way to the ones with the higher balances. The debt avalanche, on the other hand, starts with higher interest rate debts first. 5. Invest for the Future Although risky, investing can help grow your money, even if you’re not wealthy. You can get started with investing by enrolling in your company’s 401(k) plan or opening a low-or-no fee account through an online broker . Keep in mind that investing always involves some risk; you could end up losing the money you invest. There are also robo-advisors that automatically recommend investments based on your goals and risk tolerance. Looking For A Financial Advisor? Get In Touch With A Pre-screened Financial Advisor In 3 Minutes Via Datalign Advisory Bottom Line A financial plan is composed of a series of smaller goals that will help you achieve a larger financial goal, such as purchasing a home or retiring comfortably. A solid financial plan includes identifying your goals, creating a budget, building an emergency fund, paying off high interest debt and investing. How To Protect Your Assets How To Choose A Financial Advisor How To Build Wealth Are You In The Top 1%? Types Of Financial Advisors What Is A Financial Advisor? What Is A Financial Planner? What Is Fiduciary Duty? What Are Trust Funds? What Is Asset Management? What Is A RIA? What Is A CFP? What's My Net Worth? Bad Advice From Financial Advisors More In Financial Advisors Best Retirement Income Funds Best Roth IRA Accounts Best Target Date Funds For Retirement Top 4 Retirement Worries Traditional IRA Vs. Roth IRA How To Become A Financial Advisor What You Need to Know About Independent Financial Advisors Financial Advisor Vs. Financial Planner: What’s The Difference? What Is FINRA? Fee-Only Financial Planner vs. Fee-Based: What’s the Difference? Financial Advisors For Military Personnel: Everything You Need To Know Jordan Tarver has spent seven years covering mortgage, personal loan and business loan content for leading financial publications such as Forbes Advisor. He blends knowledge from his bachelor's degree in business finance, his experience as a top performer in the mortgage industry and his entrepreneurial success to simplify complex financial topics. Jordan aims to make mortgages and loans understandable. Election 2024 Entertainment Newsletters Photography Personal Finance AP Investigations AP Buyline Personal Finance AP Buyline Shopping Press Releases Israel-Hamas War Russia-Ukraine War Global elections Asia Pacific Latin America Middle East Election Results Delegate Tracker AP & Elections Auto Racing 2024 Paris Olympic Games Movie reviews Book reviews Financial Markets Business Highlights Financial wellness Artificial Intelligence Social Media Democrats put a spotlight on more than 1 million pensions saved under a 2021 law FILE - In this Jan. 3, 2013 photo, a “Pension Promise” sign is seen at the Illinois State Capitol in Springfield Ill., Jan. 3, 2013. Democrats are putting a spotlight on more than than 1 million union workers and retirees whose pensions are being saved under a law enacted in the summer of 2021. The Butch Lewis Act will ultimately stop cuts to the retirement benefits of 2 million workers and retirees across the country. The law was part of the American Rescue Plan passed by Congress along party lines to ultimately stall the insolvency of roughly 200 multi-employer pension plans for 30 years. (AP Photo/Seth Perlman, File) Copy Link copied WASHINGTON (AP) — As the general election nears, Democrats are keen to remind union voters in Pennsylvania that pensions for many workers have been preserved as part of a coronavirus pandemic-era aid package that keeps on giving. As of Friday, the White House said, more than 1 million union workers and retirees’ pensions will have been saved by the Butch Lewis Act , which became law in the spring of 2021. The law, enacted as part of President Joe Biden’s American Rescue Plan , will ultimately stop cuts to the retirement benefits of 2 million workers and retirees across the country. It is named after a retired Ohio trucker and Teamsters union leader who spent the last years of his life fighting to prevent massive cuts to the Teamsters’ Central States Pension Fund. It set up a special financial assistance program that allows struggling multi-employer pension plans to apply for assistance from the Pension Benefit Guaranty Corp., a federal agency that protects the retirement incomes of workers in defined benefit pension plans. The Butch Lewis Act is designed to ultimately stall the insolvency of roughly 200 multi-employer pension plans for 30 years. Many workers were facing cuts to their benefits of up to 50%, which would have caused massive economic damage to more than 2 million retired and retiring Americans. Biden administration officials, including senior adviser Gene Sperling, and a group of union workers with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union were in Hershey, Pennsylvania, with Sen. Bob Casey on Friday to put a spotlight on the law. Casey, a Democrat, is seeking reelection against Republican Dave McCormick in Pennsylvania’s race for the U.S. Senate. And the Biden administration is paying special attention to swing state Pennsylvania as the president seeks reelection, hoping to turn out union workers at the polls. “Whether it is Social Security, Medicare, or pensions, workers who earn a dignified retirement through decades of hard work and sacrifice should never see their benefits cut due to broken promises or policies that favor the wealthy over working families,” Biden said in a statement. Presumptive GOP presidential nominee Donald Trump picked up some blue-collar workers in his 2016 win and this year is looking to exploit a divide between union leaders who have backed Democratic candidates and rank-and-file members who could be swayed to vote Republican. Rita Lewis, Butch Lewis’ widow, told The Associated Press that before the act passed, union retirees she knew “were talking about having to sell their house and live with their kids.” Lewis, who lives in West Chester, Ohio, and receives a restored income from her late husband’s pension, said that she plans to vote for Biden in November because he kept his promise to workers. “President Biden and the Democrats held true to their word when they said they would restore our pensions,” she said. In 2016, she led a protest outside the Capitol, calling for the passage of the Butch Lewis Act, saying, “A promise is a promise is a promise.” Many multi-employer pension plans faced funding shortfalls during and after the Great Recession, when plans were left with many more retirees than active workers. Company bankruptcies and withdrawals from plans, as well as investment losses in 2001 and again in 2008 with the stock market collapse, greatly reduced the amount of money in plans, according to the nonprofit Pension Rights Center. Despite the restoration of some workers’ pensions, there are still workers whose retirement benefits were cut during the Great Recession who have not seen their benefits restored. For instance, an estimated 20,000 workers from Delphi Corp., a subsidiary of General Motors Corp., have spent the past 15 years fighting to get back what they lost after General Motors went through bankruptcy in 2009. The company said it would not assume pension liabilities for the Delphi unit’s salaried workers, unlike its union workers. After taking the issue all the way to the U.S. Supreme Court , which declined to hear their case, the retirees were cut off from their last legal remedy. They are pushing for passage of the Susan Muffley Act, which would restore their benefits similarly to the Butch Lewis Act. The White House supports that legislation. 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The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Blueprint. Blueprint does not include all companies, products or offers that may be available to you within the market. A list of selected affiliate partners is available here . The best retirement plans of 2024 Maryalene LaPonsie Hannah Alberstadt “Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy. Updated 6:36 a.m. UTC June 3, 2024 path]:fill-[#49619B]" alt="Facebook" width="18" height="18" viewBox="0 0 18 18" fill="none" xmlns="http://www.w3.org/2000/svg"> path]:fill-[#202020]" alt="Email" width="19" height="14" viewBox="0 0 19 14" fill="none" xmlns="http://www.w3.org/2000/svg"> Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy . SurfUpVector, iStock/Getty Images Plus American workers have no shortage of options for selecting the best retirement plan. Most people are eligible for more than one retirement plan. 2024 retirement plans generally offer tax advantages.  Retirement is the end goal for most workers, but you can’t quit your job unless you have a source of income. While Social Security will pay for some expenses, the government says these benefits will cover only about 40% of your pre-retirement income. In the past, many companies offered pensions that provided lifetime income to loyal employees. Now, pensions have all but disappeared, and most workers need to rely on their savings to fill gaps in their budgets. Fortunately, several retirement plans are available, many of which offer attractive tax incentives or generous employer matches. Our partners Datalign advisory. Via Datalign’s website Match with a financial advisor from a network of vetted fiduciaries. Get started Complete the questionnaire and match with an advisor for a free, no-obligation call. Via Wealthramp’s website Find your match Connect with fee-only advisors who fit your priorities Build your wealth Review your vetted advisor matches and set up a free consultation J.P. Morgan Personal Advisors Via J.P. Morgan’s website Create a personalized financial plan Get matched to expert-built portfolios, and receive ongoing advice and annual check-ins to ensure your plan is on track. INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE Best retirement plans of 2024 “You’re talking about an embarrassment of riches,” says Andrew Meadows, senior vice president of HR, brand and culture for Ubiquity Retirement + Savings, a 401(k) provider. Plans exist for employees, self-employed individuals and small-business owners. Options within each category allow people to receive immediate tax deductions or set aside money for tax-free withdrawals in the future. The best retirement plans also offer various investment options with low fees.  Employer-sponsored retirement plans Employer-sponsored retirement plans are some of the best-known options, and if you are an employee — meaning you receive a W-2 at tax time — you likely have access to one of them. These accounts can be a convenient way to save for retirement since payroll deductions fund them. Plus, many employers match a portion of employee contributions. “You want to be sure you put enough in to qualify for whatever your employer is matching,” says Stuart Chamberlin, founder and owner of advisory firm Chamberlin Financial in Boca Raton, Florida. Traditional 401(k) Traditional 401(k)s are the most common retirement plans private companies offer employees. Employee contributions to a traditional 401(k) are tax-deductible. You can access the money without penalty once you reach age 59½, and withdrawals are taxed as regular income. You must start taking required minimum distributions at age 73, meaning you cannot avoid taxes forever. You can contribute up to $23,000 to a 401(k) plan in 2024. Savers age 50 or older can contribute an additional $7,500. Roth 401(k) A Roth 401(k) works like a traditional 401(k), except the tax benefits are different. Because Roth accounts are funded with after-tax dollars, employee contributions are not tax-deductible. The benefit is that the money grows tax-free and can be withdrawn tax-free in retirement. If you make a withdrawal before age 59½ and before you have held the account for five years, some of it may be subject to income tax and a penalty. Roth 401(k) contribution limits are the same as traditional 401(k) contribution limits. A 403(b) , also known as a tax-sheltered annuity, works like a 401(k) and may be offered in traditional and Roth versions. Typically, 403(b) plans are available to employees of public schools and certain tax-exempt organizations. One unique provision of 403(b) plans is that workers with at least 15 years of service can make additional catch-up contributions, which may be worth up to $3,000.  457(b)  Employees of state and local governments and certain tax-exempt nongovernmental entities may be able to contribute to 457(b) plans. These accounts work like 401(k)s and can be found in traditional and Roth varieties. Like 403(b)s, 457(b)s have a unique catch-up feature. Workers may be able to contribute up to twice the annual employee limit during the last three years before their normal retirement age.  Thrift savings plan The thrift savings plan is a retirement plan for federal government employees and uniformed members of the armed forces. It is comparable to a 401(k) account, with similar provisions and contribution limits.  PLAN ELIGIBILITY 2024 CONTRIBUTION LIMITS BENEFITS Individual retirement plans Individual retirement arrangements, or IRAs, “have the lowest barrier to entry,” Meadows says. You generally can open an IRA as long as you have earned income, even if you have a 401(k) plan or another workplace retirement account. But note that income limits may apply to deducting traditional IRA contributions and contributing to Roth IRAs. Traditional IRA Like a traditional 401(k), a traditional IRA offers an immediate tax deduction on contributions. Withdrawals after age 59½ are subject to regular income tax. Early withdrawals are subject to income tax and a 10% penalty. Required minimum distributions must begin at age 73. You can contribute up to $7,000 to IRAs in 2024. Savers age 50 or older may make an additional $1,000 in catch-up contributions. Your contributions may not be tax-deductible if you or your spouse is covered by a retirement plan at work and you exceed certain income limits. For 2024, the ability to deduct contributions begins to phase out at modified adjusted gross incomes above $77,000 for single filers and $123,000 for married couples filing jointly. Roth IRAs don’t offer tax deductions on contributions, but withdrawals in retirement are generally tax-free. Further, because you’ve already paid taxes on your Roth IRA contributions, you can withdraw them anytime tax- and penalty-free. Early withdrawals of your earnings may be subject to income tax and a 10% penalty.  Roth IRAs share the same contribution limits as traditional IRAs, but high earners are excluded from funding these plans. For 2024, the ability to contribute to a Roth IRA begins to phase out at MAGIs of $146,000 for single filers and $230,000 for married couples filing jointly. At incomes of $161,000 and $240,000, respectively, the opportunity to contribute to a Roth IRA is eliminated.   Spousal IRA A spousal IRA refers to the ability of a working spouse to open an IRA on behalf of a nonworking spouse. In this way, stay-at-home parents or other spouses without earned income can have their own IRAs with which to save for retirement. Spousal IRAs can be traditional or Roth accounts and are subject to the same contribution and income limits as other IRAs. To open a spousal IRA, a couple must file their tax return jointly. Rollover IRA  A rollover IRA is a way to move money from one retirement account to another. For example, if you leave a job, you can roll over money from your 401(k) to an IRA rather than leave it in place. You can opt for a direct rollover or an indirect rollover. With a direct rollover, the funds are transferred from the 401(k) administrator to the IRA administrator. With an indirect rollover, you receive a distribution from the 401(k) and then deposit the funds into the IRA. If you fail to deposit the full amount into the IRA within 60 days, it may be subject to both income taxes and a 10% penalty. There is no limit on how much you can roll over. Note that rolling over into an account with a different tax treatment — from a traditional to a Roth, for instance — counts as a conversion and has tax implications. PLAN ELIGIBILITY 2024 CONTRIBUTION LIMITS BENEFITS Retirement plans for small-business owners and the self-employed  One drawback of IRAs compared to employer-sponsored retirement plans is the low annual contribution limit. But if you are self-employed or a small-business owner, you have other options with higher limits. Becoming eligible for these plans may be easier than you think. “If you have a side hustle and self-employment income, you absolutely have the ability to start your own retirement plan,” says Nathan Boxx, director of retirement plan services for financial advisory firm Fort Pitt Capital Group in Pittsburgh. Whether you work for yourself or have a team of employees, the following accounts could be good options.  Any self-employed individual or employer can open a SEP IRA , and workers can contribute the lesser of 25% of their annual compensation or $69,000 per year. That puts a SEP IRA in line with a 401(k) plan in terms of contributions. But you can’t make catch-up contributions to a SEP account. There is no Roth SEP IRA option, so your contributions will be tax-deductible. Withdrawals in retirement will be subject to regular income tax, and you’ll also need to start taking RMDs at age 73. If you like the idea of having some tax-free money available in retirement, there is no reason you can’t also open a Roth IRA. The IRS allows self-employed workers and business owners to contribute to both. The SIMPLE IRA is what Boxx calls the “quick and dirty” option for small-business retirement plans. It is available to businesses with fewer than 100 workers and has few filing requirements. “The trade-off is lack of flexibility,” Boxx says. You may not have the same plan or investment options that other accounts offer. SIMPLE IRAs also have lower contribution limits than 401(k)s. In 2024, a worker can contribute up to $16,000 to a SIMPLE IRA. Savers age 50 or older can make $3,500 in catch-up contributions. All contributions are tax-deductible, and withdrawals in retirement are taxed as regular income. RMDs must be taken starting at age 73.  Payroll deduction IRA Payroll deduction IRAs can be traditional or Roth and have the same contribution limits as those accounts. The main difference is they are funded through payroll deductions. These accounts can be an attractive option for small-business owners who would like to help their workers save for retirement but don’t want the expense that comes with creating a 401(k) plan.  Solo 401(k)  Also known as one-participant 401(k)s, solo 401(k)s allow business owners with no employees or self-employed individuals to open an employer-sponsored plan for themselves and their spouses. The reporting rules make these accounts more complex than some of the other options. On the other hand, they have significantly higher contribution limits. As an employee, you can make elective deferrals of up to $23,000 in 2024. Savers age 50 or older can contribute an additional $7,500. In addition, as an employer, you can make a profit-sharing contribution of up to 25% of your compensation from the business. Combined, the maximum solo 401(k) contribution is $69,000 in 2024.  Solo 401(k)s may be opened as traditional or Roth accounts. Why is having a retirement plan important? Most people understand the value of having money set aside for retirement, but it may not be obvious why you should use a retirement plan. After all, you could invest the money in a regular brokerage account , put it in certificates of deposit or leave it in your savings account. A retirement plan makes more sense for several reasons: Retirement plans offer tax incentives — either deductions for contributions or tax-free withdrawals in retirement. Your employer may match a portion of your contributions. That’s essentially free money to boost your savings. Retirement plans are subject to certain standards and protections by law. “Retirement money is sheltered from creditors up to a certain threshold,” Boxx says. That is one example of the type of protection your money gets when deposited in a retirement plan. How to start investing in your retirement The earlier you begin saving, the more likely you are to be financially secure in retirement. It isn’t hard to open a retirement account either. If you work somewhere that offers employer-sponsored retirement accounts, contact your human resources office to start making contributions. Most plans let you choose from several investment options, and many now have target-date funds, which make it simple to invest based on your expected retirement date. IRAs and other plans can be opened online or in person at many banks and brokerage firms. For instance, Ubiquity Retirement + Savings offers solo 401(k) plans, while Chase, Charles Schwab and Fidelity all have IRAs.    How to choose the best retirement plan for you If you have an employer-sponsored plan with a match, start there. You want to contribute enough to that plan to get the full match. After that, you can consider other options. Here are some questions to ask yourself: Do I do any contract work that would make me eligible for a small-business retirement plan? How much do I expect to be able to contribute each year? Do I want a tax deduction now, or would I rather have tax-free money in retirement? Before you jump into any account, be sure to read the fine print. “What fees are you paying?” Meadows asks. Those fees include the expense ratios for specific investments and the costs to administer the plan. An accountant or financial advisor can help you weigh your options and select the best retirement plan for your needs.  Frequently asked questions (FAQs) That depends on your unique circumstances. While Fidelity Investments suggests you save 10 times your income by age 67, you may need more or less to retire comfortably. When determining how much money you’ll need, consider the following: Whether you will have debt payments in retirement. The cost of living in your area. Your expected lifestyle. How you will fill your time. Your expected lifespan. Each account has its pros and cons. IRAs typically offer more investment options, but they may come with more fees. With a 401(k) account, you can contribute significantly more, and your plan administrator is a fiduciary, meaning they are required to work in your best interest. Talk to a trusted financial advisor to decide which is right for you.  Yes. “The IRS always gets theirs at the end,” Chamberlin says. The difference is when you pay those taxes. Roth accounts are taxed upfront since you fund them with after-tax dollars. With a traditional account, the money isn’t taxed until you make withdrawals in retirement. If you die with money in a traditional account, your heirs will pay the taxes on the remaining amount. Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results. Blueprint has an advertiser disclosure policy . The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information. Maryalene LaPonsie has been writing professionally for nearly 25 years and specializes in personal finance, retirement, investing and education topics. In addition to USA TODAY Blueprint, her work has been featured on Forbes Advisor, U.S. News & World Report, Money Talks News, MSN and elsewhere on the web. Hannah Alberstadt is the deputy editor of investing and retirement at USA TODAY Blueprint. She was most recently a copy editor at The Hill and previously worked in the online legal and financial content spaces, including at Student Loan Hero and LendingTree. She holds bachelor's and master's degrees in English literature, as well as a J.D. Hannah devotes most of her free time to cat rescue. The average 401(k) balance by age: See how you compare Retirement Coryanne Hicks Our IRA rating methodology Retirement Tony Dong Best custodial IRAs of July 2024 What is an HSA? Retirement Erin Gobler Health savings account (HSA) rules How to use your HSA in your retirement plan Social Security cost-of-living adjustment (COLA) increase for 2025 Retirement Maryalene LaPonsie Best IRAs of July 2024 Best Roth IRAs of July 2024 401(k) loans: What they are and how they work How to withdraw money from your 401(k) early Best investments for a Roth IRA How to open a Roth IRA Retirement Ashlyn Brooks What is a backdoor Roth IRA? What’s the 401(k) early withdrawal penalty? Share full article Advertisement Supported by Hidden Stashes: Keeping Money Secrets From a Loved One People hide money for a variety of reasons, from nefarious to romantic. But financial experts say such secrets can erode a basic pillar of relationships: trust. By Lisa Rabasca Roepe Ric Shahin wanted to surprise his wife with a special trip for their 10th wedding anniversary, so he set up a secret bank account and began depositing $50 from his paycheck every two weeks. But he soon realized that although he had two and a half years to save for the trip, he wouldn’t have enough, so he increased the deposit to $150. “This went on for a while before my wife noticed that there seemed to be money from my paycheck unaccounted for,” Mr. Shahin said. That was 25 years ago, and the couple were working as teachers in the same Midland, Mich., school district. So his wife, Martha Shahin, knew how much he was paid and how much was deducted. “I was wondering if they hadn’t calculated his paycheck correctly,” Ms. Shahin said. She began asking to see his pay stub, but Mr. Shahin always had an excuse — he didn’t know where it was, he must have left it at work. Mr. Shahin, now 66, finally confessed that he was depositing money into a secret travel fund. He expected his wife to be pleased with his romantic gesture. Instead, she was irritated. “He wanted to do this really nice thing, but I was also angry because he knows I don’t like surprises,” Ms. Shahin, 60, said. We are having trouble retrieving the article content. Please enable JavaScript in your browser settings. Thank you for your patience while we verify access. If you are in Reader mode please exit and  log into  your Times account, or  subscribe  for all of The Times. Thank you for your patience while we verify access. Already a subscriber?  Log in . Want all of The Times?  Subscribe . 424 IMAGES Small Business Retirement Plans, What To Know(2023) A Quick Guide to Retirement Plans for Small Business Owners What are small business retirement plans? How can you Structure a Retirement Plan if you are a Business Owner? Choosing The Best Small Business Retirement Plan For Your Business The Definitive Small Business Guide to Retirement Planning VIDEO Small Business Retirement Plans How did adding retirement benefits help this restaurant recruit great help? Economic Review & 2022 Outlook Considering a Small Business Retirement Plan? Don't Forget These Tax Credits! Ep 15 Small Business Retirement Solutions COMMENTS Small-business retirement plans SE 401(k): Self-employed individual or business owner with no employees other than a spouse. SEP IRA: Self-employed individual or small business owner, primarily those with only a few employees. 1. Fidelity Advantage 401(k): Small and medium- sized businesses looking to offer a 401(k) for the first time. SIMPLE IRA: Self-employed individuals or businesses with 100 or fewer employees. A Guide to Small Business Retirement Plans A solo 401 (k) is a 401 (k) that's designed just for sole proprietors. (The only exception is if you own a business and your only employee is your spouse.) With this type of small business retirement plan, you make contributions as the employer and the employee. As the employee, you can contribute up to $20,000 for 2022, or up to $22,500 if ... Compare Retirement Plan Options for Small Businesses Set up a meeting. 4 Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary. If you're self-employed or a business owner with employees, compare our tax-advantaged retirement plans for small businesses. Compare small-business retirement plans Small businesses that want to provide a retirement benefit to all employees (including the business owners) solely through employer contributions. None. For 2024, up to $23,000, not to exceed 100% of compensation. Roth contributions are accepted. For 2024, up to $16,000, not to exceed 100% of compensation. None. Small business retirement plans Small-business owners have unique needs when it comes to saving for their retirement and helping their employees. We've recently announced that existing Individual 401 (k), SIMPLE IRA, and SEP-IRA plans with multiple participants will be transferred to Ascensus. If you're just getting started, those plans can be established directly with Ascensus. Small Business Retirement Plans: Explore Your Options Small Business 401 (k) Attract and retain talented employees with a low-cost 401 (k) plan designed for small businesses. Contribute more than 3 times the limit of a traditional IRA 2. Access potential tax advantages for you, your business and your employees 1. Choose from a menu of funds chosen by Morningstar. 3. Small business retirement plans 1. Retirement plans offer tax-advantaged saving opportunities, while helping to attract and retain quality employees. 2. Small business owners can utilize IRAs, 401 (k)s, and profit-sharing plans for their businesses. 3. Retirement plans have unique filing, compliance, and contribution requirements. If you own a small business—or plan to ... 401k Plans for Small Businesses Fidelity's small business 401 (k), Fidelity Advantage 401 (k) SM is a great option for companies looking to offer a 401 (k) for the first time. Available from Fidelity Workplace, this streamlined plan features: Affordable transparent pricing. Potential tax credits for startup costs. Employer matching contributions. Publication 560 (2023), Retirement Plans for Small Business For 2023, the maximum compensation used for figuring contributions and benefits is $330,000. This limit increases to $345,000 for 2024. Elective deferral limits for 2023 and 2024. The limit on elective deferrals, other than catch-up contributions, is $22,500 for 2023 and $23,000 for 2024. Retirement plans for small entities and self-employed Your Retirement Funds Can Help You with Coronavirus Relief. Get relief for certain withdrawals, distributions, and loans from retirement plans and IRAs if you're affected by the coronavirus. Information on retirement plans for small businesses and the self-employed. Choose a Plan. A 401(k) Plan for the Small Business Owner A SBO 401(k) is a tax-deferred, government-registered retirement savings plan for small business owners. more. SIMPLE IRA: Definition, How Small Businesses Use, and Drawbacks. SMALL BUSINESS RETIREMENT PLANS Choosing the right retirement plan for your small business is a crucial decision. It not only impacts your own future financial security as a small business owner but plays a significant role in attracting and retaining top talent. With various options available, each comes with its own set of advantages and disadvantages. 401k Plans for Small Business Owners Recordkeeping fee will be billed to business owners quarterly ($435 plus per-participant fees). Pricing shown applies when working with a third party administrator (TPA). With bundled pricing, the recordkeeping fee is $185 per month ($555 billed quarterly) plus per-participant fees. How to Choose the Best Retirement Plan for Your SMB A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a small business retirement plan that is easy to set up and has low contribution and matching requirements for employers. It allows ... Small Business 401(k) Retirement Plans from Merrill Small Business 401 (k) Features. Enjoy contribution limits 3 times higher than that of a traditional IRA 1. Make contributions that are generally tax deductible by the business 2. Take the guesswork out of investing with a menu of funds and model portfolios 3,4. Reduce your admin with a plan that's straight forward and easy to manage. What are small business retirement plans? What is a small business retirement plan? A small business plan is a tax-deferred plan that offers retirement savings for self-employed individuals and their spouses, or small business owners. Some define a small business owner as a business owner with less than 10 employees, but one of the plans we offer - a SIMPLE IRA - can be used as long as ... How to Select a Small Business Retirement Plan Selecting small-business retirement plans. This could take a few moments. As a small-business owner, you know it's important to have a retirement plan for yourself, and for any employees you have or may hire. And as you consider which plan is right for your company, it's important to think carefully about your priorities and goals. 401(k) for Small Businesses Retirement 401(k) Small business 401(k) Not-for-profit organizations Defined Benefit Nonqualified plan services Health HSA & reimbursement accounts Health & welfare services Wellness solutions Voluntary benefits Equity Public companies Private companies Manage debt Student Debt Give & volunteer Workplace Giving Plan, invest & retire Advice ... Small Business Retirement Plans Personal Defined Benefit Plan. Who it's for: Owner-only businesses or those with up to five employees. Key features: Highest contribution limits. Contributions are generally 100% tax deductible. Helps target your desired level of income in retirement. Who can contribute: Employer only. Compare Retirement Plans Wells Fargo Advisors offers a full suite of retirement plans to support your business. Compare our plans, or call one of our experienced financial professionals at 1-877-493-4727. Small business owners can make tax - deductible contributions with this flexible plan. If you have employees, you will most likely be required to contribute for them. Small Business Solutions and Services From retirement plans to short-term loans, the business solutions you need are here in one convenient place. Small business retirement plans Schwab offers a full range of plans for businesses of any size, from SEP IRAs to 401(k)s. Best Retirement Plans 2024: Reviews, Comparisons, & Guides Explore the best retirement plans to grow your nest egg and secure a comfortable retirement. Compare 401(k)s, IRAs, and other savings options. Individual 401(k) Plan Tax implications vary for traditional and Roth plans: Contributions to a traditional Individual 401(k) plan are generally tax deductible. Contributions to a Roth Individual 401(k) plan are after-tax salary deferrals. For a traditional Individual 401(k), earnings grow tax-deferred and assets are not taxed until they are withdrawn in retirement. Plan for Retirement With This Comprehensive Guide Retirement saving tools such as IRAs, 401(k) plans and Roth accounts play central roles in many retirement plans. Equally important are strategies to maintain consistent contributions to retirement savings, keeping current expenses from becoming excessive, and managing risk with the help of emergency savings and health and other types of insurance. Self-Employed 401k Plan from Fidelity A self-employed 401(k) is a qualified retirement plan for a small business where the only employees are the owner(s) of the business and/ or the spouse(s) of the owner(s) if they work for the business. You shouldn't use this plan if you have any other employees. The self-employed 401(k), in some cases, can offer you the ability to make a larger ... What Is Financial Planning? No matter the size or scope of your financial goals, a financial plan can help make them a reality. Financial planning is the process of looking at the current state of your finances and making a ... Democrats put a spotlight on more than 1 million pensions saved under a The law, enacted as part of President Joe Biden's American Rescue Plan, will ultimately stop cuts to the retirement benefits of 2 million workers and retirees across the country. 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