What Types of Small Business Retirement Plans Are Available?


Saving for our future is an important goal for most of us. For small businesses, there are several different retirement plans that can help employees save, while also providing tax benefits and reducing administrative overhead. Each type has its own advantages and disadvantages, so it is important to carefully consider your options before deciding which plan is right for your business. The most common types of retirement plans for small businesses include:


This is a type of savings account that is available to small businesses and self-employed individuals. It is an easy way to save for retirement, and it offers many benefits, including tax breaks and matching contributions from employers. Employees can contribute up to $15,500 per year to a SIMPLE IRA, and employers are required to match employee contributions up to 3%.  A SIMPLE IRA allows employees to begin saving for retirement immediately, and employer contributions can help attract and retain good employees. However, there are some limitations on contributions and eligibility that must also be considered.

Small Business 401(K)

Similar to a SIMPLE IRA, this type of saving offers tax benefits and employer contributions, and it also gives employees more flexibility in contributing to their accounts. With a small business 401(k), employees can typically contribute up to $20,500 per year and employers often match contributions. In addition, these plans may allow employees to borrow against their balances and make Roth contributions. It’s important to note that small business 401(k) can be more complex than other types of plans, and they may come with higher administrative costs. However, it usually offers the most flexibility in terms of contribution limits and investment options.

SEP Plan

A Simplified Employee Pension (SEP) is a saving strategy that utilizes an IRA and only employer-provided contributions. This type of plan would be appropriate for both self-employed entrepreneurs and employers with employees. Each year, the company gets to decide if it will make SEP deposits into its employees’ traditional IRAs. SEPs do not offer matching contributions, and they are not subject to non-discrimination testing requirements. This means that they can be simpler and less expensive to manage than other plans. However, the maximum contribution limit for SEP accounts is lower than some other types of plans.

Choosing The Right Plan

When deciding which saving option is right for you, it’s important to carefully consider your options. This can depend on a variety of factors, including the size and needs of your workforce, contributions you can make each year, and the range of investment options available, as well as eligibility requirements and administrative costs. Depending on your business goals, one retirement savings type may be a better fit than another. Ultimately, the best one will depend on your unique situation and priorities.


Choosing the right retirement savings option is an important decision, and it should be made carefully based on your own needs and goals. Consider all the available options and speak to a financial advisor or tax specialist if you have questions or need help making your decision. With the right plan in place, you can feel confident about your future savings and financial security.