Saving for Retirement as a Business Owner

Every small business owner knows what it’s like to reinvest earnings back into their business to boost its growth. While that approach might increase profits, many owners fall short when it comes to building longer-term personal retirement savings.

A May 2025 survey by 401k Specialist found that one in five small business owners had no retirement savings, and most who do have less than $50,000 set aside. This survey also found that many owners carry an expectation that the business itself will eventually serve as their primary source of retirement income.¹

Relying Solely on the Business Can Be Risky

Hope is inspiring, but it’s not a great retirement strategy. While a future sale or transition may provide a windfall, the outcome you might be hoping for may rely on unpredictable factors beyond your control. Market conditions, buyer availability, health considerations, and unforeseen changes in your industry or the overall economy…any of these can throw a wrench into the works. Building assets outside your business helps give you greater flexibility in your retirement strategy and adds a layer of protection to your post-work era funds.

Retirement Choices for Business Owners

Here’s a quick overview of some retirement choices that are designed for self-employed individuals and business owners.

• Solo 401(k)
  Designed for owner-only businesses (and, in some cases, a spouse), this structure allows contributions as both employee and employer, which can support higher annual savings limits than many other accounts.²
• SEP IRA
  Often used by sole proprietors or small firms, a SEP IRA allows employer-only contributions based on a percentage of compensation, offering flexibility in years when cash flow fluctuates.²
• SIMPLE IRA
  Typically used by businesses with employees, a SIMPLE IRA allows for both employee contributions and required employer contributions, with lower administrative complexity compared to other alternatives.

Each choice has different eligibility rules, contribution limits, and administrative considerations, which may influence how well it aligns with a business owner’s situation.

Remember, once you reach age 73, you must begin taking required minimum distributions from your Solo 401(k), SEP IRA, SIMPLE IRA, or other defined contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10 percent federal income tax penalty.

Balancing Business Growth and Personal Savings

It’s tempting to view retirement savings as an “either-or” decision: you either reinvest in the business or you can put funds aside for your future. Your best bet might just be to do both—continue to grow your company, but also direct a portion of your cash flow toward a personal retirement account.

If you’re waiting to begin saving, now is the time to start. Made consistently, even modest contributions can benefit from compounding over time. If you’re 50 or older, catch-up provisions can offer additional flexibility when accelerating savings later in your career.³

The Bottom Line

Your business may remain a central part of your financial picture, but it doesn’t have to be the only one. Understanding the retirement savings options available to you as a business owner can help support your long-term goals, regardless of how the business ultimately transitions.

If you’d like to explore your options, we’re happy to connect anytime.

<sup>1. 401kSpecialistMag.com, May 15, 2025
2. IRS.gov, Internal Revenue Service, August 26, 2025
3. Fidelity.com, 2025</sup>