When it comes to retirement planning for small business owners there are a lot of options available which can be confusing.

There is no one strategy that is perfect for everyone so our goal here is to give you an overview of what’s available to help you make a decision on what you may want to implement in your business.

We partner with Matt Ruttenberg and Life Inc Retirement Services so if you would like to get started on setting up a retirement plan you can visit their site here.

With the changes from the Secure Act 2.0, now is a great time to start a retirement account for your business. Check out our Blog and Podcast on that here.

What Is The Goal of A Business Retirement Plan?

Before you think about putting a retirement plan in place you need to think about what your goal is by starting one as that will be a starting point to the best option for YOU. Typically we say you fall into of these (or both):

• Employer looking for their own retirement or tax savings.
• Help recruit and retain high quality employees. 

What Retirement Options Are Available On The Personal Side?

Both a Traditional IRA and Roth IRA are options that are available to you whether you are a business owner or not.

• Traditional IRA
  • 2023 Contribution Limits:
    • $6,500 (If 50 or older: $7,500)
    • Starts to phase out at AGI of $73k (Single) or $116k (Married) if you are covered by a workplace retirement plan.
• Roth IRA
  • 2023 Contribution Limits:
    • $6,500 (If 50 or older: $7,500)
    • Starts to phase out at AGI of $138k (Single) or $218k (Married).

What Retirement Plan Options Are Best For Businesses With No Outside Employees? 

If you have no employees you will likely want to focus on one of the two options below.

• SEP IRA
  • 2023 Contribution Limits:
    • EmployER: $66,000
  • Allows the owner to contribute up to 25% of their W2 income. If you are a sole proprietor, the maximum is 20% of net earnings.
  • All contributions are pre-tax.
  • Employee contributions are NOT allowed. (employer must do same amount of contribution as their own).
  • Who is this plan for?
    • Companies with few or no full-time employees.
    • Business owners looking for a simple retirement plan.
    • Employers who want to eliminate annual filings and compliance testing.
    • Employers who don’t mind contributing equally to their employees.
  • Learn More Here

• Solo 401k (AKA Individual 401k)
  • 2023 Contribution Limits:
    • EmployEE: $22,500 (If 50 or older: $30,000)
    • EmployER: Maximum 25% Contribution 
    • Max Between Employee and Employer: $66,000 (If 50 or older: $73,500)
  • Will allow the owner to contribute 100% of their income up to a certain point.
  • Allows the company to match your contribution.
  • Choice of Pre-tax or Roth Contributions.
  • Who is this plan for?
    • Solo-entrepreneurs and employers with no full-time W-2 employees.
    • Business owners thinking of adding employees in the future.
    • Highly successful solo-entrepreneurs looking for considerable contributions.
    • Business owners who want to include their spouse in a plan.
  • Learn More Here

What Retirement Plan Options Are Best For Businesses With Employees?

When you have employees outside of the owners you will want to look into the following options.

• Payroll Deducted IRA
  • 2023 Contribution Limits:
    • $6,500 (If 50 or older: $7,500)
    • Same phaseouts of Traditional IRA and Roth IRA above.
  • Gives your company the feel of a retirement plan for your employees, even if you’re not quite ready for a 401k.
  • Allows your employees to contribute towards retirement straight out of their paycheck.
  • Choice of Pre-tax or Roth contributions.
  • Matching contributions from the employer are not allowed.
  • Learn More Here

• SIMPLE IRA
  • 2023 Contributions Limits:
    • EmployEE: $15,500 (If 50 or older: $19,000)
  • “Turn-key” matching and vesting options.
    • Either 3% match or 2% employer contribution required.
  • Your choice of employment qualification into the plan.
  • No administration costs.
  • Important Deadline: If you want to start a Simple IRA before the end of the year, there is a deadline of October 1st.
  • Who is this plan for?
    • Companies with under 100 participants in the plan.
    • Employers looking for a low cost alternative to a 401(k) plan.
    • Employers who want to eliminate annual filings and compliance testing.
    • Business owners who don’t mind an instant vesting schedule.
  • Learn More Here

• Safe Harbor 401k
  • 2023 Contribution Limits:
    • EmployEE: $22,500 (If 50 or older: $30,000)
    • EmployER: Maximum 25% Contribution 
    • Max Between Employee and Employer: $66,000 (If 50 or older: $73,500)
  • Allows the owner to maximize contributions without relying on high employee participation.
  • “Turn-key” matching and vesting options for easy compliance testing.
  • Both Pre-tax and Roth Options inside the plan.
  • Important Deadline: If you want to start a Safe Harbor 401k before the end of the year, there is a deadline of October 1st.
  • Who is this plan for?
    • Companies with one or more full-time employees.
    • Employers who want to maximize their own contributions.
    • Businesses looking to compete for quality employees in their market.
    • Employers who want to minimize annual compliance testing.
  • Learn More Here

What Advanced Retirement Planning Options Are Available?

• Every single plan is different with a fully custom design and flexibility.
• Cash Balance Plan
  • 2023 Contribution Limits:
    • $300,000+
      • Aged Banded Contribution Rates
  • Can be a stand alone plan or paired with any 401(k) and Profit Sharing plan.
  • High contribution limits for high income earning business owners.
  • Allows employers to save substantially on taxes
  • All contributions are employER contributions.
  • Requires actuary in additional to normal compliance needs.
  • Learn More Here

• Non-Qualified Plans
  • Deferred Compensation Plan
  • Bonus 162 or Executive Bonus Plan
  • Owner Only Plans 
  • Learn More Here

On our Tax Minimization Program monthly group training for February 2023 we did a deep dive into retirement strategies. If you are not yet a member there, I highly recommend you join as we touch on this topic yet so many more!

As a reminder, we partner with Matt Ruttenberg and Life Inc Retirement Services so if you would like to get started on setting up a retirement plan (or just looking for a consultation) you can visit their site here.