Do You Own a Small Business and Want a Retirement Account? Here’s How to Get Started
You own a small business. Maybe you’re self-employed, a sole proprietor with just yourself and perhaps your spouse on the payroll, or a company with a handful of employees. Congratulations! Even in trying economic times, businesses like yours are the backbone of this country’s economy.
The myriad positives about starting and owning your own business (being your own boss, creating a product your way and seeing it to fruition, building something to pass on and more) notwithstanding, there is one area that can bedevil many small businesses: money. That umbrella term includes a regular, guaranteed paycheck, but also benefits and perks like gym memberships, health insurance, HSAs, and PTO.
It also includes retirement savings accounts like 401(k)s, IRAs and other savings vehicles that larger companies can and do offer employees. If you have employees, are you offering them retirement savings accounts? If you’re self-employed, have you started one for yourself?
The answer to that last question is likely “no.” Why? Let us count the ways.
Reasons small business owners don’t have retirement accounts
You’re investing in your own business. You’ve probably been pumping every last dollar back in your own business in an effort to get yourself on a solid foundation. Many self-employed people do the same. It’s a mistake. You’re prioritizing your present over your future. Balance is the key here.
You anticipate selling your business when it’s time to retire. Dreaming of that golden parachute when just the right investor comes along at just the right time? That’s a gamble. When the day comes, there’s no guarantee you’ll find someone to carry on your legacy.
You’re too busy to think about it. Running a small business, even if it’s just you on the payroll, can be a 24/7 job. You may have been so caught up in the everyday flurry of keeping things humming while you put out fires that you haven’t had a moment to think about retirement.
It’s complicated. Tax implications and advantages, 401(k)s, IRAs and more. It’s hard to know which option is right for you, your business and if applicable, your employees.
These are all valid, common reasons. But, those decisions are based on a lot of “what-ifs.”
It’s great to pump every last nickel into your business when you’re a startup, but is it really necessary now? Can’t you take some money off the top and sink it into a retirement account each month? Your future self will thank you when you’re living the good life in those golden years.
Hoping to sell your business down the road? We hate to raise this specter, but technology is evolving faster than Alexa can tell you what the weather is like outside. What if technology makes your product or service obsolete tomorrow? We’re pretty sure the person who invented Wite-Out or the business model for Blockbuster or the Blackberry didn’t anticipate the tech evolution that would put those products on the “Remember When” shelf.
The best course of action is to invest a little in yourself now to see dividends down the road. But how do you know which retirement account to choose? That’s where we can help. At Equity Trust, we specialize in helping people who are self-employed small business owners lay a solid foundation for their retirement amid the chaos that can come with running a business.
Types of retirement accounts for self-employed small business owners
We have several options for plans that are designed to take the guesswork and hassle out of setting up retirement accounts for yourself and your loyal employees. All you need to do is focus on the growing peace of mind those accounts will give.
With all of these retirement plans, you’ll experience the power of self-directed investing, even if you work for yourself.
Here’s a rundown of several options for retirement accounts specifically designed for small business owners like you. To get more detailed information about these plans, visit Retirement Plans for Business Owners.
A SEP (Simplified Employee Pension) is designed for self-employed individuals or small businesses with fewer than 25 employees. If you earn a self-employment income, you are allowed to save more for retirement using a SEP plan than a traditional IRA or Roth allows. A SEP is less complex and costly than a 401(k), allows individuals to contribute larger amounts than a traditional or Roth IRA and may qualify for larger tax deductions.
A SIMPLE IRA (Savings Incentive Match Plan for Employees) is ideally suited as a start-up retirement savings plan for small employers who have 100 or fewer employees, and who are not sponsoring a retirement plan. Contributions are tax-deductible, and earnings within the account are tax-free until withdrawn.
The Solo 401(k) is for sole proprietors and offers the same benefits of a regular 401(k), but it is designated for a business in which only the owner (and their spouse) is an employee. You can choose to set it up as a Roth, with the tax advantages of withdrawals being tax-free when the time comes.
More information about small business plans
Looking for more information about these plans to decide which is right for you? At Equity Trust, we can help. Read more here or watch this video, “Small Business Retirement Plans: Overview” by our educator, John Bowens.
Contact us today and we can set you on the road to a more comfortable retirement.
Equity Trust holds a variety of IRAs, as well as other self-directed accounts, including:
- Traditional IRA
- Roth IRA
- Simple IRA
- SEP IRA
- Solo 401(k)
- Roth Solo 401(k)
- Health Savings Account (HSA)
- Coverdell Education Savings Account (CESA)
The IRS publishes maximum IRA contribution limits and catch up provisions each year. Summaries for each type of contribution can be found on Contribution Limits.
Get answers to your questions and learn more about building wealth with tax advantaged accounts.Ask Us