Retirement is something that should be in the back of your mind as an employee, but as a small business owner, you have a bit more responsibility. Small businesses are essential in the U.S., making up 99.9% of businesses in the country. With more and more businesses operating at home as a self-made company, small businesses continue to trend upward. Because of this, there are a ton of options for small business owners to take care of themselves and their employees. Here are the best retirement plans for small business owners.
Traditional/Roth IRA
The first retirement plan you should consider early on is a traditional or Roth IRA. For this retirement plan, you can contribute up to $6,000 this year and $1,000 more if you are older than 50. As far as taxes are concerned, you get a tax deduction for a traditional IRA contribution. For a Roth IRA, there isn’t a deduction right away, but any withdrawals for retirement are tax-free. A traditional or Roth IRA plan is great for those who are looking to start their own business. You also have the option to rollover your old 401k in the IRA of your choosing.
Solo 401k
Another option you have for retirement is to file a solo 401k. This plan is great for those who operate a small business with no other employee besides their spouse. In 2020, you can contribute up to $57,000 and even do so for your partner. A solo 401k is one of the best retirement plans for small business owners out there.
SEP IRA
If you are looking to start a retirement plan, you can also choose to do a SEP IRA as a small business owner. SEP stands for Simplified Employee Pension and allows a sole proprietor to take care of employees. A SEP IRA is completely contributed to by employers, with employees making no contributions. Every year, business owners can decide on how much to contribute for their employees and do so for themselves, but it must be the same percentage.
Establishing a retirement plan for yourself and your future is an important step to take for all small business owners.
