EP Wealth Vice President, Advisor, Eric Nikssarian, CFP®, shares retirement planning strategies for small business owners, from choosing the right plan type to coordinating with tax strategy as the business grows.
The self-employed clients I work with naturally wear a lot of hats—if not all the hats when it comes to running their business. From sales to marketing, and human resources to finances, small business owners can have countless roles. Really, the last thing they want to do is add to their plate.
But retirement planning is one of those things that tends to reward attention early and penalize delay. Business owners who set aside time to put a plan in place often find that the right structure can offer meaningful tax advantages, help attract and retain employees, and create flexibility as the business grows.
In this blog, I walk through what I see most often when working with small business owners on retirement planning, including:
The business owners I work with are pouring everything into their vision: their heart and soul—and their assets. When you're focused on keeping the business running and growing, retirement planning can feel like something to deal with later. Part of my job is to remind them about the importance of building a nest egg for the future and providing a path to get there.
Part of the challenge is unfamiliarity. Setting up and managing a retirement plan involves decisions that fall outside most owners' day-to-day expertise. Cost can be a factor as well. A basic state-sponsored program like CalSavers in California may cost little to set up, but as a business grows and needs a more robust plan, the out-of-pocket costs for third-party administrators and ongoing compliance can add up.
There's also what I like to call "decision fatigue." The number of plan types, contribution structures, compliance requirements, and provider options can be overwhelming, especially when you're already running a business. It's easy to postpone a decision that feels complicated, even when you know it's important.
These are some of the most common reasons retirement planning gets pushed to the bottom of a business owner's list. An advisor can help you cut through the complexity and put a plan in place that fits your situation.
Retirement planning for business owners involves more moving parts than it does for someone earning a fixed salary with fixed expenses. Income and expenses can fluctuate, and your bottom line may be directly affected by broader economic conditions.
That said, business owners may also have more flexibility and higher contribution limits than traditional employees, depending on how the plan is structured. With the right approach, a retirement plan can serve the business owner and employees at the same time:
There are several retirement plan types that may be available to small business owners. The right fit depends on factors like how many employees you have, how much you want to set aside, and how much administrative overhead you're willing to take on.
This is one of the simplest options to set up and maintain. Contributions are made entirely by the employer, and for 2026, the limit is generally the lesser of 25% of compensation or $72,000. Contribution levels can vary from year to year, which gives business owners flexibility. One thing to keep in mind: whatever contribution percentage you choose for yourself as the business owner, you must contribute the same percentage for all eligible employees.
This plan allows both employer and employee contributions, with lower administrative costs than a 401(k). It tends to work well for businesses with a smaller number of employees that don't need the highest possible contribution limits.
This is designed for self-employed individuals or business owners with no employees other than a spouse. You can contribute as both employer and employee, with a combined limit of up to $72,000 for 2026—or up to $83,250 for participants ages 60–63. It also allows for Roth contributions, which are made with after-tax dollars and can be withdrawn tax-free in retirement.
This is where plan design starts to get more customizable. Employee deferrals and employer contributions can work together, and the profit-sharing piece can be adjusted each year based on how the business performs. It involves more administration and compliance, but it opens up more flexibility.
These are pension-style plans with contribution limits that can be significantly higher than other options—which may appeal to higher-earning owners who want to set aside more for retirement. They involve greater administrative costs and actuarial requirements, but for the right situation, they can be a valuable tool. Some owners pair a defined benefit plan with a 401(k) for additional flexibility.
Most business owners tend to start with a straightforward approach to retirement planning. That's reasonable. But as the business evolves, the plan should evolve with it.
One of the potential advantages of working with an advisor is the ability to customize plan design to fit your circumstances as the owner. For example, let's say profits were up considerably this year, but next year you encounter some economic uncertainty. You're still making payroll, but you're not in a position to contribute at the same level as the previous year. A plan that allows you to adjust contributions—such as a 401(k) with discretionary profit sharing—can provide the flexibility to contribute more when cash flow is strong without locking you into a fixed obligation during leaner periods.
On the other end of the spectrum, a business owner with stable, high earnings may benefit from adding a defined benefit or cash balance plan on top of a 401(k). These plans allow for substantially higher annual contributions, which can help accelerate retirement savings—particularly for owners who are starting later or looking to reduce taxable income.
* The example presented is hypothetical in nature and not reflective of a real client or scenario. There is no guarantee nor is the intention of this example to establish any sense of assurance, that, if followed, the strategies referenced here will produce a positive or desired outcome.
Business owners may benefit from choosing a retirement plan that can scale alongside the business, rather than one that may need to be replaced every few years.
Step 1: Assess Your Situation
Consider business size, income, number of employees
Step 2: Review Plan Options
Compare plan types by contribution limits, flexibility, and cost
Step 3: Check Available Tax Credits
Federal credits may help offset start-up and administration costs
Step 4: Customize the Plan Design
Structure the plan to fit your business stage and goals
Step 5: Implement and Maintain
Set up with a third-party administrator; schedule ongoing reviews
Your advisor can guide you through each of these steps so you can focus on running your business.
The cost of setting up a retirement plan is one of the most common concerns I hear. It's worth noting that federal legislation—specifically the SECURE Act 2.0—has introduced meaningful tax credits that may help offset some of those costs for eligible businesses.
A separate credit may be available for employer contributions to a new plan—up to $1,000 per participating employee per year. This credit is generally available for the first five years of the plan, with the percentage phasing down after year two. Eligible employers with up to 100 employees may qualify, though the available credit is reduced for businesses with more than 50 employees.
Businesses that add an automatic enrollment feature to a new or existing plan may qualify for an additional $500 per year for up to three years.
These credits can make a meaningful difference in the early years of a plan, particularly for smaller businesses where administration costs are a barrier. Your advisor or tax professional can help determine what your business may be eligible for.
How you structure your retirement plan, when you make contributions, and how much you put in each year all affect your tax picture. For example:
At EP Wealth, our advisors work closely with in-house tax planning professionals to coordinate retirement plan decisions with your broader tax picture. That kind of integrated approach is particularly valuable for business owners, where personal and business finances are often closely intertwined.
Some business owners assume that selling the business will take care of retirement when the time comes. That can be a risky assumption—sales can fall through, valuations can shift, and the tax impact of a sale can be larger than expected. Building a retirement strategy alongside your exit plan, rather than after it, gives you more flexibility.
A few considerations:
EP Wealth's business planning services can help owners think through these questions alongside their retirement strategy.
Trying to research plan options, understand compliance requirements like ERISA, and evaluate providers while also running a business can feel like a lot. That's where working with an advisor and a third-party administrator can help.
I look for ways to mitigate costs by evaluating plan options that fit the business's needs while keeping administration expenses reasonable. Once we identify a few options that could work, we walk through the benefits, risks, and trade-offs of each so the business owner can make an informed decision.
Your financial advisor is here to take some of that weight off your plate—handling the legwork so you can focus on what you do best: running your business.
Business owners who want to explore retirement planning as part of a broader financial plan can reach out to an advisor at EP Wealth. We can help guide you toward the right plan structure for your business stage and goals.
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