Retirement – What Small Business Owners Need To Know about Retirement Planning

I”ve been thinking quite a bit about my life in the next 10 or more years. I’m 50 and know that one day I’ll be 60 and 70 and won’t’ be able to work as much or simply won’t want to work as much. Want do I do? What do YOU do? I’m no financial advisor, but here’s what I’m learning:

Related: How Entrepreneurship Can Help Lower Student Debt

  1. Saving money is important
  2. Investing money is important
  3. Diversifying my investments are important.
  4. Consider real estate, very safe, I think
  5. And a broad range of stocks, bonds, mutual funds and the like.

The most important thing you can do? Build a thriving business that is highly profitable. Take those profits and invest them for the future.

The details do matter, but this is the journey I’m on, what about you? Here are some insights gleaned from small business money expert Ruchi Pinniger and from Mike Michalowicz, author of Profit First.

Being an entrepreneur or small business owner requires tremendous hard work, but it also has its perks – it offers freedom, flexibility, and the opportunity to make a difference in the world. However, one of the significant downsides of being a business owner is that there is no guarantee of a retirement package.

Unlike employees who have the option to participate in an employer-sponsored pension plan, business owners must take care of their retirement planning independently. Retirement planning can seem daunting, but with the right knowledge and support, it is possible.


An IRA or Individual Retirement Account is a popular choice for small business owners because it is easy to open, flexible, and the contributions are tax-deductible.

Small business owners who have an IRA can contribute up to $6,000 annually. If you are over 50, you are allowed to make catch-up contributions of up to $1,000. The best part about an IRA is that you have control over your investments and can invest in stocks, mutual funds, and bonds. You can choose between a traditional IRA or a Roth IRA. A traditional IRA offers tax-deferred contributions, whereas a Roth IRA allows for tax-free withdrawals during retirement.


Another option for small business owners is a SEP IRA or Simplified Employee Pension. A SEP IRA allows business owners to contribute up to 25% of their net income. However, there are some eligibility requirements, such as having a minimum net income of $600. A SEP IRA can also be used to contribute on behalf of your employees, making it a valuable retirement planning option for small business owners who have employees.

Solo 401k

A Solo 401(k) is another retirement planning option for self-employed entrepreneurs. It allows you to contribute up to $19,500 as an employee, along with up to 25% of your net income as an employer, up to a combined contribution limit of $58,000. A Solo 401(k) offers an excellent opportunity for small business owners to maximize their retirement savings while also benefitting from significant tax advantages.

Simple IRA

A Simple IRA or Savings Incentive Match Plan for Employees is another great option for small business owners who want to save for retirement and offer a retirement plan to their employees. A Simple IRA allows employees to contribute up to $13,500, and the employer can match contribution by up to 3% of an employee’s salary. The contributions are tax-deductible, making it a great investment for both business owners and employees.

It’s important to remember that saving and investing should be a crucial part of your retirement planning, regardless of which plan you choose.

Ruchi Pinniger of Watch Her Prosper advises small business owners to make student loan and credit card debt a priority before contributing to their retirement plans. She also suggests diversifying investments, such as investing in stocks, mutual funds, and bonds to ensure your retirement savings are well-rounded.

As a small business owner, it is important to think ahead and plan for retirement. Explore options such as an IRA, SEP IRA, Solo 401(k), or Simple IRA to maximize retirement savings.

It’s essential to not only plan for retirement but also focus on saving and investing effectively.

Implementing a sound retirement strategy will require hard work and a commitment to financial discipline, but if done right, it will be rewarding in the long run.

Mike Michalowicz in his bestselling book, Profit First, says, “the road to riches is paved with profit and the roadmap to get there is your cash flow statement.” Planning for retirement can seem overwhelming at first, but with the right support and knowledge, it is entirely possible.

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