If you own a business and haven’t prioritized saving for retirement because you’re counting on a future sale to fund the next chapter, you may be leaving real money on the table – right now. I get it: your business is your greatest asset, and you’re betting on a significant liquidity event down the road. Why lock up capital in retirement accounts today?

Retirement plans for business owners: Here’s why they’re worth a second look.

Business owners carry a lot on their shoulders: the full 15.3% self-employment tax, the cost of healthcare, and the responsibility of building your own nest egg without the employer match that employees often take for granted. It’s no wonder retirement savings can feel like a lower priority when you’re focused on growing your business.

But the right retirement vehicle isn’t just a savings account – it’s a strategic tool. Contributions can reduce your taxable income today through “above the line” deductions (regardless of whether you itemize) and, in some cases, tax credits to offset the costs of starting a new plan, thanks to the original Secure Act and the enhanced Secure Act 2.0. Add in the power of compounding and tax-deferred growth over time, a well-chosen retirement plan starts to look a lot more like optionality than obligation.

Getting serious about a retirement strategy is also about more than the numbers. It creates a sense of financial security that doesn’t depend entirely on one exit event, giving you more options regardless of how that sale ultimately unfolds.

The decision to start is the first in a string of decisions. Below, we’ll walk through the key questions to help you figure out which plan is right for your circumstances and goals.

Evaluating Retirement Plans as a Business Owner

If you own a business, here are 3 considerations when evaluating retirement plans:

1. Do you have employees?

A solo 401(k) is a one-participant plan—meaning you can’t contribute to one if you have W-2 employees. This plan is designed to cover your and your spouse if they earn income from the business.

With IRA-based plans (SEP & SIMPLE), you can contribute whether or not you have employees. The catch: you can’t exclude eligible employees, and you must contribute at the same rate you do for yourself. (There is some flexibility with SIMPLE IRAs depending on the employer contribution method you choose.) That said, taking care of your employees isn’t just a compliance requirement. It’s an investment in retention and culture. Don’t let that cost be a dealbreaker.

Defined Benefit plans allow business owners to make contributions for themselves and their employees, though the amounts will vary depending on actuarial calculations based on employee demographics (more on that below). These are considerably more complex than set contribution limits and rates with a 401(k) or IRA based plan, and they come with mandatory funding requirements. Again, you have to include all eligible employees.

2. How much will you realistically contribute?

For 2026, the IRS maximum contribution for an individual across most plan types is $72,000. Additional catch-up opportunities may exist for those over 50 depending on the plan type, and the SECURE Act 2.0 introduced an enhanced “super catch-up” for ages 60-63 (more on that below). Here’s how the major plan types break down:

SEP IRA contributions are capped at the lesser of $72,000 or 25% of total compensation (or 20% of net adjusted self-employment income for the self-employed). ¹ That means that if your self-employment income is less than around $360,000, you won’t be able to contribute the full $72,000. SEP IRAs can’t receive catch-up contributions.

If your income is well below that threshold but you still want to maximize contributions, a solo 401(k) may be the better fit if you don’t have employees.

Contributions up to $24,500 are permitted as a salary deferral (assuming you earned at least that much), just like any other 401(k) plan. You can contribute an additional amount as an “employer” contribution based on a percentage of your net adjusted self-employment income, up to the $72,000 total.

What if you have employees and won’t be making large contributions for them or yourself? A SIMPLE IRA will allow you to make a 1-3% employer contribution and provide the opportunity for yourself and employees to save up to $17,000 in salary deferrals for 2026. It’s a lower-lift option that still provides meaningful savings opportunities for you and your team.

 What if you are flush with cash and want to make larger contributions? A defined benefit plan may allow you to make significantly larger contributions, with amounts determined based on your age, compensation, and retirement age. These are typically best for those over the age of 50 without employees and businesses with substantial (and reliable) free cash flows since contributions are required and non-discretionary.

A note on Catch-up Contributions and Secure Act 2.0: If you’re 50 or older, catch-up provisions allow you to contribute beyond the standard limits for 401(k) and SIMPLE IRAs ($8,000 for 401(k) and $4,000 for SIMPLE IRA). SECURE Act 2.0 also introduced a “super catch-up” for ages 60-63: 401(k) plans this increases the catch-up limit to $11,250 and for SIMPLE IRAs, the limit is increased by $5,250. Depending on your wage income, catch-up contributions may need to be made as Roth rather than pre-tax – a change worth discussing with your advisor.

3. How much administrative complexity are you willing to take on?

SEP, SIMPLE, and solo 401(k) plans are the simplest to set up and maintain. Most can be established using a prototype IRS form or adoption agreement, and ongoing reporting requirements are minimal – though solo 401(k) plans with assets exceeding $250,000 require an annual IRS filing.

IRA-based plans, like SEPs and SIMPLEs, can be set up using standard IRS forms and do not require ongoing reporting to the IRS. Thus, they are low-cost to set up and maintain.

A solo 401(k) can also be set up with a simple prototype form or adoption agreement (i.e. turnkey solution), but this may come with a small fee depending on where the account is opened and if a third-party prototype is used.

Defined benefit plans are a different animal entirely. They require custom plan documents, actuarial involvement, mandatory annual funding, and ongoing administration costs. This complexity is the price of significantly higher contribution potential.

The Bottom Line

With several options available and the stakes this high, the right plan isn’t a one-size-fits-all decision. At Monument, we help business owners cut through the complexity to understand how the right plan structure fits into the bigger picture of your wealth strategy and what it means for your tax picture today and your options tomorrow.

Any plan is better than no plan. Don’t let analysis paralysis keep you from moving forward. If you’re ready to think through what this could mean for you, we’re here for that conversation.

1 Net adjusted self-employment income accounts for a deduction of one-half the self-employment tax and the amount contributed to a retirement plan (yes, you must include your contribution amount when trying to figure out what your compensation is for the purposes of making contributions). There are numerous calculators to help determine this, and your CPA can help! 

Contribution limits are current as of 2026 and are subject to IRS cost-of-living adjustments.