Key points
- Business owners have retirement plan options beyond standard IRAs.
- Solo 401(k)s, SEP IRAs, SIMPLE IRAs, and cash balance plans can unlock powerful tax savings.
- The One Big Beautiful Bill (OBBB) introduces new deductions and planning opportunities.
What Makes Retirement Planning Different for Business Owners?
Running your own business comes with freedom and responsibility. Unlike traditional employees, business owners don’t automatically receive a retirement plan from an employer. That means securing your financial future is up to you. The advantage is flexibility, you can use plans with higher contribution limits, more substantial tax benefits, and options that grow with your business. The right choice depends on your income, team size, and retirement timeline.
Solo 401(k): High limits for solo owners
A Solo 401(k), also called a one-participant 401(k), is built for businesses with no employees other than a spouse. You can contribute as both an employee and an employer.
For 2025, the combined limit is up to $70,000, or $77,500 if you’re 50 or older. Ages 60-63 can qualify for an extra $11,250 catch-up, for a total of $81,250. Many providers also allow Roth contributions. If your spouse works in the business, they can join the plan, doubling household savings.
Best for: Owner-only businesses or couples who want high savings with low administration.
SEP IRA: Simple and scalable
A Simplified Employee Pension (SEP) IRA is one of the easiest plans to start. In 2025, you can contribute the lesser of $70,000 or 25 percent of compensation, based on a $350,000 cap.
SEPs don’t allow employee deferrals or age 50 catch-ups, but they’re flexible: you can skip or adjust contributions if profits dip. If you hire, you must contribute the same percentage for eligible employees as you do. Thanks to Secure Act 2.0, some providers let you make Roth contributions in a SEP.
Best for: Owners who want low-cost simplicity and plan to add employees.
Cash balance and defined benefit plans: Saving at scale
Pension-style plans can deliver outsized benefits for owners with substantial profits and fewer years until retirement. A defined benefit plan promises a set payout at retirement, while a cash balance plan uses a formula to create a notional account.
Contribution limits can reach six figures beyond IRA or 401(k) caps. These plans require actuarial oversight and a steady commitment, but the tax deductions are powerful. Many owners pair them with a 401(k) to maximize contributions and flexibility.
Best for: High-income owners in their 50s or 60s who want to accelerate savings.
SIMPLE IRA: Easy for small teams
A SIMPLE IRA is designed for businesses with 100 or fewer employees. Employees can contribute; you must match their contributions or provide a small fixed percentage. Limits are lower than SEPs or Solo 401(k)s, but administration is light and costs are low.
Best for: Small businesses that want to offer a retirement plan with minimal effort.
How Does the One Big Beautiful Bill Change Retirement Planning?
The One Big Beautiful Bill, passed in July 2025, introduced essential tax updates. It permanently extended the lower Tax Cuts and Jobs Act rates, added a new deduction for people 65 and older from 2025 through 2028 ($6,000 for singles and $12,000 for couples), raised the federal estate tax exemption to $15 million per person and $30 million per couple starting in 2026, and temporarily increased the SALT deduction cap to $40,000 for households earning under $500,000 through 2029.
For business owners, this creates planning opportunities. Stable tax brackets make Roth conversions and withdrawals easier to time. The age-based deduction can offset larger contributions in your 60s. And the higher estate exemption offers more room for legacy planning.
How Can You Move Forward with a Tax Smart Plan?
Business owners have more tools than most to build retirement wealth. A Solo 401(k) provides high limits for owner-only businesses, an SEP IRA offers simple flexibility for those adding staff, cash balance and defined benefit plans allow substantial tax-deductible contributions, and SIMPLE IRAs give small teams an easy benefit.
With the OBBBA locking in lower rates and expanding deductions, now is the time to take action. The right plan can help you maximize savings, reduce taxes, and create the retirement you want—while strengthening the future of your business.
Frequently Asked Questions (FAQs)
- Which plan allows the highest contribution?
A Solo 401(k) allows up to $70,000 in 2025 before catch-ups. Defined benefit and cash balance plans can allow even larger deductible contributions. - Is a SEP IRA a good choice if I plan to hire employees?
Yes. A SEP IRA includes eligible employees and requires equal percentage contributions for them, making it a strong option for growing businesses. - Can business owners use Roth features in these plans?
Yes. Solo 401(k)s often allow Roth contributions, and Secure Act 2.0 expanded Roth options for SEP IRAs through certain providers.
