Retirement for Small Business Owners | Plan Options and Strategies

Retirement Tips for Small Business Owners

You won’t be able to run your business forever. Whether out of choice or necessity, you’ll probably have to retire at some point.

When you retire, you’ll need money to continue paying your expenses. Have you thought about how you’ll pay for your future?

Retirement for small business owners doesn’t have to be painful. Go through your options and choose several that will hopefully work for you.

Retirement for small business owners

Thirty-four percent of business owners don’t have a retirement plan. This means one in three business owners might be in a financial pickle when they’re older. Use the following tips and retirement plan options for small business owners to secure your future.

Small business owner retirement tips

Before you look at your retirement options, determine your retirement expectations. When do you hope to retire? Approximately how much money will you need to pay for future expenses? Do you have any health conditions that might increase your future expenses? Do you have a spouse or dependent to factor in?

You must make plans for your business when you retire. Create an exit strategy or succession plan. Will you sell your business, pass it on to someone, or dissolve it? Do you hope to get income from it?

After you determine your expectations, talk to a financial advisor. An advisor can use your retirement goals and exit strategy to direct you to the best retirement options.

When selecting your retirement income options, it’s beneficial to diversify. You never know how the economy will perform or how well your business will do long-term. By using multiple sources for future income, you will hopefully have money even if one option doesn’t do as well as predicted.

Tips for small business owners for choosing retirement options

Retirement options for small business owners

Here are several retirement strategies for small business owners.

Relying on your business

Eighteen percent of business owners without traditional retirement savings hope to sell their businesses to fund their retirement. If you do this, you’ll use the profits from the sale to pay your future expenses.

Other owners want to pass the business on to a family member and take a share of future profits. Your family member will continue running the business. You can set up a deal with the family member so you can reap a regular percentage or fixed dollar amount from the business.

Still, 12% of business owners without a retirement savings plan don’t have any intention to retire. They plan to run their business until their last breath, either because they want to remain in control or because they don’t think they have enough money to retire.

With the previous options, you might be out of luck if your business fails. Because of the potential risks, you may want to diversify your retirement planning strategy. This way, even if your business fails, you have other sources of retirement income.

Retirement plans for small business owners

When it comes to retirement plans, you have several options. The option you choose will depend on your business structure and whether or not you have employees. If you have employees, a retirement plan can also benefit them.


An SEP-IRA is a Simplified Employee Pension plan where you make contributions to an Individual Retirement Account. This plan is best if you are self-employed or if you own a business with employees. You can set up an account for yourself and each employee.

With an SEP-IRA, only employers make contributions to the plans. Employees cannot make contributions to their individual plans.

SEP-IRAs are tax deductible. You can claim your contributions as a business expense.


SIMPLE stands for Savings Incentive Match Plan for Employees. With a SIMPLE IRA, you set up Individual Retirement Accounts for yourself and your employees. SIMPLE IRAs are only for businesses with 100 employees or fewer. You business also cannot have any other retirement plan.

Both you and employees can contribute to the accounts.

The contributions you make as an employer are tax deductible. Employees contribute to their accounts before taxes.

Self-employed 401(k)

A self-employed 401(k) is also called a solo 401(k). This type of 401(k) is similar to a traditional 401(k). However, this type of 401(k) only covers self-employed people and business owners with no employees other than their spouses. You cannot have employees if you have a self-employed 401(k).

You can contribute as both the employer and the employee to one of these retirement plans for business owners. You can put in employer contributions and salary deferrals.

Do you need to account for retirement funds and other business expenses? Use online accounting software from Patriot Software. It’s designed for small business owners, so it’s easy to use.

This article is updated from its original publication date of 1/17/2013.

Stay up to date on the latest accounting tips and training