The Top Three Retirement Plans for Small Business
Are you a small business owner? Here is a brief overview of three main types of tax-deferred retirement plans to consider, which are suitable for self-employed individuals, independent contractors, 1099 earned income recipients, LLCs, incorporations, partnerships, and sole proprietors.
Individual 401k
Also known as a Solo 401k, this plan is one of the most popular choices for those who are self-employed. You are allowed to borrow against it.
| Who is it for? | Sole Proprietors |
| Benefits: | Allows for the highest contribution amount |
| Max. contribution: |
Salary deferrals: up to $16,500; for those over 50, it is $22,000 Employers contributions: up to 25% of compensation total must not exceed $49,000; or $54,500 if age 50 or more |
| Annual fees: | About $20 |
| Plan setup deadline: | December 31 |
SEP-IRA
Simplified Employee Pension Plans are also a popular choice. These plans have very little administration and a tax filing is not required. You cannot borrow against a SEP-IRA.
| Who is it for? | Self-employed individuals and small business owners |
| Benefits: | Inexpensive, easy to set up and maintain |
| Max. contribution: | 25% of compensation or $49,000 (whichever is less) |
| Annual fees: | About $20 |
| Plan setup deadline: | Company’s tax filing deadline |
SIMPLE IRA
A Savings Incentive Match Plan for Employees is not as complex as a 401k, but offers more than a SEP-IRA.
| Who is it for? | Self-employed individuals; small businesses with up to 100 employees |
| Benefits: | Salary deferral plan with both employer and employee contributions |
| Max. contribution: |
Salary deferrals: up to $11,500 per year Employer matching: dollar-for-dollar match of salary deferrals, up to 3% of participants compensation – or – employer nonelective: 2% of each eligible employee’s compensation |
| Annual fees: | About $20 |
| Plan setup deadline: | Anytime prior to October 1 of each calendar year |
For more in information please visit:
Fidelity Retirement Comparison Chart
