Written by: Emily Joswiak • December 10, 2021• Business

How To Save for Retirement When You Own Your Business

If you’re self-employed, there’s no reason you can’t enjoy a retirement plan just like a salaried employee. Here’s how to save when you own your business.

Many entrepreneurs aren’t sure how to save for retirement when they’re their own boss. Thankfully, we can help! From SIMPLE IRAs to Solo 401(k)s, here’s how to save for retirement when you own your business.

Traditional or Roth IRA

The Traditional or Roth IRA is a classic retirement plan that’s perfect for people just starting to save for retirement. Whether or not your business has other employees, this plan can work for you. You’re limited to a maximum of $6,000 in contributions for 2021 and 2022, or $7,000 if you’re 50 or older.

Something important to note is that the Roth IRA has income limits—if you make more than a certain amount of money, you can’t contribute.

SIMPLE IRA

The SIMPLE IRA is perfect for you if you have a growing enterprise with up to 100 employees. Employees can contribute to the plan with salary deferrals, and you (as the employer) are required to make matching contributions up to three percent or fixed two percent contributions to all your employees. If you’re planning to grow your business soon, this option is a great choice.

You should also know that there is a 401(k) alternative to the SIMPLE IRA, in which participants can take out loans from their accounts. If this appeals to you and your team, be advised that more administrative oversight is required than with the SIMPLE IRA.

Solo 401(k)

If you’re the only person at your business (other than a spouse, if you have one), the Solo 401(k) may be perfect for you. This is a great option if you’re looking to save a lot of money because you act as both employer and employee in this plan. You can contribute up to $58,000 as the employee, and then you can add an extra 25 percent of compensation as the employer.

Now that you know how to save for retirement when you own your business, don’t forget about contribution limits. The amount is increasing in 2022, so make sure you maximize your savings to enjoy the best retirement possible.

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