Entrepreneurs Guide to Retirement Plans

Creating a Plan that Actually Works

Whether you’re a solo practitioner, business owner with a growing team, or a company leader aiming to retain top talent, your retirement plan should reflect your vision, values, and unique income structure.

This guide breaks it all down into three path – for the three kinds of entrepreneurs we serve every day:

Independent Entrepreneurs & Solo Business Owners
Employers with a Team
Employers with High-Earning Executives or Key People they’d like to retain
Let’s explore each path, the options available and how we help make them work for you.

Independent Entrepreneurs & Solo Business Owners

As a self-employed business owner, you wear all the hats. You handle the marketing, sales, fulfillment and financial decisions – and somewhere in the chaos, you’re also expected to figure out how to retire.

The good news? There are several powerful retirement strategies designed specifically for independent entrepreneurs like you. The eve better news? With the right guidance, these plans can reduce your taxes, grow your wealth, and help you build a secure future – without overwhelming complexity.

We’ll walk you through the most relevant options, explain the pros and cons, and show how we guide clients to the right plan for their income, goals and lifestyle. But first, we want to debunk common myths and misconceptions that many small business owners may have.

The Myths: What Most Self-Employed People Get Wrong About Retirement Planning

Myth 1: “I don’t make enough money to worry about retirement yet.”

Even small contributions add up. The earlier you start, the more powerful compound growth becomes.

Myth 2: “I’ll set something up when I’m making more.”

Delaying means missing tax savings and long term growth. You can start small and scale up.

Myth 3: “I have an IRA. That’s good enough.”

IRA’s are a start, but plans like Solo 401(k)’s or SEP IRA’s offer far higher limits and more flexibility.

Myth 4: “I’ll just sell my business someday.”

That’s not a plan. Retirement savings giving you control, even if your business changes.

Myth 5: “It’s too complicated.”

That’s what we’re here for – to simplify the process and guide you through it step by step.

Myth 6: “I’ll catch up later.”

Time is the one thing you can’t get back. Catch-up options help, but starting now is the best move.

Myth 7: “401(k)’s are only for people with employees.”

Actually, Solo 401(k)’s are only for those without full-time employees- they’re perfect for solopreneurs.

Myth 8: “My accountant will just handle it.”

Most CPA’s handle taxes, not strategy. We’ll help you build and maintain the right retirement plan, year after year.

The Options

Traditional or Roth IRA

These are the simplest retirement vehicles available and often the ﬁrst step in retirement savings for self-employed people.

Contribution Limit: $7,500 (2026), plus $1,100 catch-up if age 50+
Tax Advantage:
- Traditional IRA: Pre-tax contributions, taxed when withdrawn
- Roth IRA: After-tax contributions, tax-free withdrawals in retirement

Pros:

Easy and inexpensive to set up
Ideal for low-to-moderate income earners
Provides tax ﬂexibility (choose pre-tax or post-tax)
Works well as a supplemental account

Cons:

Low contribution limits
No employer match
Income phaseouts for Roth contributions

When we recommend it:

We often recommend IRA's as a foundational tool, especially when just getting started. They also pair well with other plans as your business grows. We typically recommend investing 15% towards retirement, which means if you're under age 50 and earning less than $50,000 in 2026, then this is the perfect option for you.

SIMPLE IRA

Ideal for very small businesses or solo practitioners who want to start contributing more but aren’t quite ready for the complexity of a 401(k).

Contribution Limit: $17,000 + $4,000 catch-up (age 50+) or $5,250 catchup (age 60-63) in 2026
Employer Match Required: Either 3% match or 2% nonelective contribution
Now includes Roth contributions under SECURE Act 2.0

Pros:

Higher contribution limits than IRAs
Low cost and easy to administer
Employer contributions are tax-deductible
Great starter plan if considering hiring in the future

Cons:

Mandatory employer contributions
Less ﬂexibility than a 401(k)
No Mega Roth strategies available

When We Recommend It:

When clients want something between an IRA and Solo 401(k), this is a solid middle ground — especially if planning to bring on part-time staff. When combined, with an IRA or Roth IRA, it allows you to achieve 15% of your income towards retirement if you're younger than 50 and make less than $163,000 in 2026.

SEP IRA

A ﬂexible, high-contribution plan for business owners who want simplicity but have variable income.

Contribution Limit: Up to 25% of net earnings, up to $70,000 (2026)
No Roth (yet) or catch-up contributions

Pros:

Simple to establish and maintain
Very high contribution potential
Great for high-income years
No ongoing ﬁling requirements

Cons:

Employer-only contributions
Contributions must be the same percentage for all eligible employees (if any)
Not ideal if wishing to make monthly contributions
May need to withdrawal excess contributions in lower earning years if maxing out the plan and not earning at least $280,000 in 2026.
No Roth or after-tax option (yet)

When We Recommend It:

We recommend SEP IRAs for consultants, creatives, and contractors with strong predictable income, excess cash at the end of the year, and no employees. It’s a great tax-deferral tool for high-earning years.

Solo 401(k)

This is often the most powerful and ﬂexible retirement option for self-employed individuals.

Contribution Limit: Up to $72,000 total (employee + employer under age 50)
$24,500 deferral limit
$8,000 catch-up age 50+ ($80,000 total)
$11,250 catch-up age 60-63 ($83,250 total)
Allows: Pre-tax, Roth, and after-tax contributions
Loan Access: Up to $50,000 available

Pros:

Contribute as both employee and employer
High contribution limits
Roth and Mega Backdoor Roth strategies available
Investment ﬂexibility
Can borrow from the plan in emergencies

Cons:

Annual Form 5500 ﬁling once assets exceed $250K
More complex than IRA-based options
Ineligible once you hire full-time non-spouse W-2 employees (but we help with plan transitions)
Catch up contributions must be Roth for high-income earners (>$150k in FICA wages in prior year)

When We Recommend It:

This is our go-to solution for solopreneurs looking to make a maximum annual deferral or those who want to mix Roth and pre-tax strategies. Especially effective for those over 50 looking to catch up and build wealth quickly.

For those that want to maximize contributions on a pre-tax basis, Proﬁt sharing is an optional feature business owners can add to a 401(k) plan to signiﬁcantly boost retirement contributions beyond employee deferrals. It allows owners to contribute up to 25% of their net self employment income up to the IRS annual limit. These contributions are discretionary, meaning you can decide each year how much (if anything) to contribute, based on your business's proﬁtability. Strategically, proﬁt sharing gives you ﬂexibility to reward yourself with a tax reduction in strong years while managing costs in leaner ones.

The Mega Backdoor Roth is an advanced retirement strategy that allows high earners to contribute signiﬁcantly more to Roth accounts than standard IRS limits typically allow. It works by combining after-tax contributions to a 401(k) with an in-plan Roth conversion for tax-free growth. These contributions are not limited by the same 25% net income rule for proﬁt sharing.

This strategy is complex and requires precise plan design and compliance oversight, which is why we help our clients implement it correctly and take full advantage of the long-term beneﬁts.

Cash Balance Plan

A pension-style deﬁned beneﬁt plan that allows for extremely large contributions, especially for older business owners with high income.

Contribution Range: Often $100,000 to $300,000+ per year
Must Be Paired With: A Solo 401(k) or another qualiﬁed plan
Tax Beneﬁt: Massive reduction of taxable income

Pros:

Allows the highest contribution limits of any plan
Contributions are tax-deductible
Designed for long-term wealth accumulation
Can dramatically reduce taxes in peak earning years

Cons:

Must commit to consistent contributions for 3–5 years
Requires actuarial calculations and ongoing plan administration
Not ideal for low or inconsistent income

When We Recommend It:

We use these with clients over 40 earning $300K+ who want to build retirement savings quickly and reduce tax liability. Particularly powerful when you have a short window to catch up.

Employers & Small Business Owners

As your business moves beyond a one-person operation, your responsibilities change — and so should your retirement plan. You’re no longer just building wealth for yourself. Now, you're building a business that supports employees, attracts talent, and operates within the growing complexity of legal and financial compliance. Offering a competitive retirement plan isn’t just a nice benefit — it’s a critical tool for growing your team, reducing your tax liability, and structuring your business to thrive for years to come.

Many states — including Washington and Oregon — now or will require small businesses to either enroll in state-sponsored retirement programs (like WA Saves or OregonSaves) or provide a qualified alternative plan. While these programs aim to increase retirement access, they come with significant limitations. Employers have little to no control over investment options, contribution limits are low, and administrative portals can be clunky and difficult to manage.

Additionally, employees often don’t receive personalized advice, and employers gain no strategic tax advantages or plan customization. Fortunately, business owners can opt out by implementing a more robust private retirement plan, such as a SIMPLE IRA or Safe Harbor 401(k), which allows for higher contributions, tax planning strategies, and a better experience for both the employer and employees.

But here’s the truth: most business owners don’t have the time or expertise to navigate the fine print of retirement plans. From plan design and IRS rules to fiduciary risk and employee onboarding, the details can get overwhelming fast — and costly if you get them wrong. That’s where we come in.

Our team works with business owners like you to design retirement strategies that are easy to run, fully compliant, and tailored to your cash flow and goals. We take care of the heavy lifting — from plan selection and implementation to investment oversight and employee education — so you can focus on building your business while helping your employees (and yourself) build wealth.

SIMPLE IRA

The SIMPLE IRA is designed for small employers (typically 100 or fewer employees) and has lower administrative complexity than a full 401(k). Under SECURE Act changes, SIMPLE IRAs can now include Roth (after‑tax) contribution options, giving employees and owners more tax planning ﬂexibility.

Contribution Limit: $17,000 + $4,000 catch-up (age 50+) or $5,250 catchup (age 60-53) in 2026
Employer Match Required: Either 3% match or 2% nonelective contribution
Now includes Roth contributions under SECURE Act 2.0

Pros:

Lower administrative burden than 401(k)
Immediate vesting for all contributions
Employers can choose between matching or non‑elective contributions

Cons:

Lower contribution limits than 401(k) options
Employer contributions required each year
Less ﬂexible design than a 401(k) with proﬁt sharing

When We Recommend It:

SIMPLE IRAs are often a good ﬁrst step for businesses without the complexity of a full 401(k). Adding Roth features increases their appeal by giving employees and owners tax‑free growth opportunities. Often times, these are a better alternative than state mandated retirement plans.

Safe Harbor 401(k)

A Safe Harbor 401(k) is a 401(k) with mandatory employer contributions that automatically satisfy IRS nondiscrimination testing. This makes it easier for business owners to maximize their own contributions while offering a strong beneﬁt to employees.

Contribution Limit: Up to $72,000 total (employee + employer under age 50)
$24,500 deferral limit
$8,000 catch-up age 50+ ($80,000 total)
$11,250 catch-up age 60-63 ($83,250 total)
Allows: Pre-tax, Roth, and after-tax contributions

Pros:

Avoids complex IRS testing
Owners can contribute the maximum while protecting beneﬁts for employees
Predictable employer costs with basic or enhanced match formulas

Cons:

Employer must make matching or non‑elective contributions for all eligible employees
Slightly less ﬂexibility in year‑to‑year design changes

When We Recommend It:

This is one of the most effective plans for growing teams because it simpliﬁes compliance and lets you focus on other parts of your business while giving employees a meaningful beneﬁt.

Traditional or Roth 401(k) with Profit Sharing

A traditional 401(k) allows employees to defer salary into their own accounts, and the employer can also contribute through matching or discretionary proﬁt sharing. Roth options allow after‑tax contributions for tax‑free growth.

2026 Limits:

Up to $24,500 in elective deferrals ($32,500 total with catch‑up)
Total plan contributions (employee + employer) up to $72,000

Pros:

Highly customizable for company goals
Supports Roth, pre‑tax, and after‑tax strategies
Can include proﬁt sharing to boost owner and employee savings

Cons:

Still requires nondiscrimination testing (unless Safe Harbor features are added) which may reduce eligible contributions for owners of the business
More complex design and administration

Proﬁt Sharing Contributions Explained:

Proﬁt sharing lets your business contribute extra retirement funds — up to the overall plan limit — based on proﬁts or strategic formulas you choose. These employer contributions are tax deductible and can be used to reward performance, increase retirement readiness for employees, and enhance owner savings.

Contributions must be shared across all eligible employees under IRS allocation rules. Proﬁt sharing gives you ﬂexibility to boost contributions in proﬁtable years while aligning rewards with business performance.

Strategy Insight:

This is often the backbone of high‑value employer plans. By combining employee deferrals, employer matching, and proﬁt sharing, we help owners maximize retirement beneﬁts across the team in a tax‑efﬁcient way.

Managing Your Retirement Plan the Right Way

Offering a retirement plan is a big step — but managing it correctly is where the real value (and risk) lies. A well-run plan can attract top talent, deliver signiﬁcant tax savings, and help build long-term wealth for both owners and employees. A poorly managed plan, however, can result in unnecessary costs, legal exposure, and a beneﬁt that no one truly uses or understands. To get the most out of your retirement plan, there are ﬁve key areas that demand ongoing attention:

Plan Design That Aligns With Your Business Goals

The structure of your plan should reﬂect your objectives — not just regulatory minimums. You’ll need to make thoughtful decisions about eligibility rules, vesting schedules, employer contributions, Roth availability, and whether to offer features like proﬁt sharing or automatic enrollment. These choices affect participation, perception, and your long-term costs.

Employee Communication and Engagement

Even the best plan can fall ﬂat if your employees don’t understand how to use it. Clear communication, straightforward enrollment, and basic education about investment choices are critical to driving participation and satisfaction. Business owners should ensure employees feel conﬁdent in using the beneﬁt — otherwise, it may go underutilized or misunderstood.

Investment Oversight and Fiduciary Responsibilities

As a plan sponsor, you’re a ﬁduciary — responsible for selecting and monitoring the plan’s investment options and ensuring fees are reasonable. This means regularly reviewing fund performance, documenting your decisions, and understanding where liability may exist. It's not just about offering investments — it’s about managing them with care and documentation.

Compliance, Testing and Filing Requirements

Retirement plans are subject to a range of IRS and Department of Labor rules, including annual nondiscrimination testing, contribution limits, employee notiﬁcations, and Form 5500 ﬁling. Missing a deadline or failing a test can lead to penalties or plan disqualiﬁcation. Keeping track of dates, documentation, and plan updates is a year-round responsibility.

Period Plan Review and Strategic Adjustments

Your business will grow and change — and your retirement plan should evolve with it. Adding employees, increasing proﬁts, or shifting goals may require changes to plan design, contribution formulas, or provider services. Reviewing the plan annually (or during major business changes) helps ensure it stays aligned with both your needs and regulatory requirements.

Retirement plans aren’t static. They’re dynamic tools that require ongoing attention, strategic thinking, and consistent oversight. Business owners who treat them as such unlock powerful advantages — in recruiting, tax planning, and long-term wealth creation.

The good news? You don’t have to become a retirement plan expert — you just need to know where to focus, what to look out for, and who to lean on when the plan becomes more than a simple beneﬁt.

Executive Compensation & Incentive Based Plans

Once you’ve covered the basics — like offering a 401(k) or profit sharing — the next step in building a high-impact compensation package is developing strategies that reward and retain your most valuable people: founders, partners, key employees, and top producers.

In today’s competitive talent landscape, salary alone isn’t enough to attract or retain top performers. Key people want long-term wealth opportunities, tax-smart compensation, and plans that reward loyalty, performance, and leadership.

This is where executive compensation planning comes into play. These strategies are designed to help business owners:

Go beyond IRS limits on qualified plans
Defer and reduce taxes on large income
Create meaningful retention incentives
Offer flexible, non-equity rewards
Build long-term alignment with top talent

Non-Qualified Deferred Compensation (NQDC) Plans

A Non-Qualiﬁed Deferred Compensation (NQDC) plan is a contractual arrangement between a company and a highly compensated employee that allows the individual to defer a portion of their income to a future date, typically retirement or separation from service. Unlike traditional 401(k)s or IRAs, these plans aren’t subject to IRS contribution limits, giving high earners a way to put signiﬁcantly more money to work for the future while reducing current taxable income. These are often used in conjunction with other retirement plan strategies.

How It Works

An NQDC plan is essentially a promise to pay. The employee agrees to defer part of their salary, bonus, or commission today, and the company agrees to pay that amount (plus any investment gains) at a later date. The deferred funds are not taxed until distributed, which gives the participant control over the timing of their income and potential tax savings — especially if they expect to be in a lower tax bracket in retirement.

Strategic Benefits

Unlimited Contributions: Unlike qualiﬁed plans, there are no IRS-mandated limits on how much can be deferred.
Matching: Can provide a way for an employer to enhance their matching for highly compensated employees.
Tax Deferral: Income is not taxed until distributed — typically years later.
Custom Payout Options: Distributions can be scheduled at retirement, death, disability, or other speciﬁed events.
Talent Retention: NQDCs can include vesting schedules or forfeiture clauses that encourage long-term retention.
Supplemental to 401(k): For high earners already maxing out qualiﬁed plans, this offers a powerful second tier of tax-advantaged saving.

Considerations & Risks

Lack of ERISA Protection: These are not protected by qualiﬁed plan laws, which allows ﬂexibility but limits employee safeguards.Creditor Risk: Because the plan assets remain part of the company, the participant is an unsecured creditor. If the business fails, the deferred comp may be lost.
Complex Compliance: IRC Section 409A governs these plans and includes strict rules around elections, payout timing, and documentation. Violations can trigger immediate taxation and penalties.
Limited Availability: These plans are designed only for a select group of highly compensated or management-level employees.

Use Cases

A high-performing executive wants bonus income to grow tax-deferred, with payouts starting at age 60 over 10 years.
A company wants to retain a COO by offering a non-qualiﬁed plan that vests after 5 years and pays a lump sum at retirement
A company’s 401(k) plan fails nondiscrimination testing, forcing highly compensated employees to receive contribution refunds. Rather than limiting retirement savings for owners and executives, an NQDC plan is implemented to allow these individuals to defer additional income without being subject to 401(k) contribution limits or testing rules. This restores tax‑deferred savings opportunities while avoiding ongoing compliance headaches. ays a lump sum at retirement.

When to Consider

You're maxing out your 401(k) and want to save more in a tax-deferred way
You have top earners you want to reward or retain without offering equityYou want a ﬂexible alternative to formal pension or deﬁned beneﬁt plans
You’re comfortable with the participant assuming some credit risk
Your business has strong cash ﬂow and long-term stability

Supplemental Executive Retirement Plans (SERPs)

A Supplemental Executive Retirement Plan (SERP) is a non-qualiﬁed, employer-funded beneﬁt designed to provide additional retirement income to select executives, partners, or key employees. Unlike deferred compensation plans, SERPs don’t require the employee to give up income today — instead, the business funds the beneﬁt entirely, making it a powerful tool for retention, succession, and reward. SERPs are contractual arrangements, not governed by ERISA’s qualiﬁcation rules, which gives the business ﬂexibility in design and freedom to reward a select group without offering equity or making public beneﬁt commitments.

How It Works

A SERP is typically structured as a future promise to pay the executive a deﬁned beneﬁt at retirement, often over a ﬁxed period or as a lump sum. The company sets the beneﬁt amount, the vesting schedule, and the payout terms. The company may choose to informally fund the obligation to help the company manage cash ﬂow while maintaining control over the asset and beneﬁt structure.

Strategic Benefits

Selective Participation: Unlike 401(k)s or pensions, SERPs don’t need to be offered to all employees. You can tailor them to reward top leaders only.
Tax-Advantaged Growth for the Business: Assets used to informally fund the plan can grow tax-advantaged while backing up the future beneﬁt.
No Contribution Limits: Since these are non-qualiﬁed plans, there are no IRS caps on beneﬁt amounts.
Powerful Retention Tool: Beneﬁts can be tied to service years, retirement age, or performance goals — ensuring key people have an incentive to stay long-term.
Succession Planning: SERPs can support buyouts or smooth ownership transitions by providing post-retirement income without selling shares or equity.

Considerations & Risks

Unsecured Promise: Like NQDCs, SERPs are not protected by a trust and are subject to the company’s ﬁnancial strength.
Accounting Requirements: The business may need to disclose liabilities associated with the beneﬁt on ﬁnancial statements.
Compliance with IRC 409A: Plans must meet strict tax code requirements for documentation and payout timing to avoid penalties.
Potential Golden Parachute Issues: For larger beneﬁt amounts, especially in M&A scenarios, additional tax considerations may apply.

Use Cases for SERPs

A closely held business wants to retain a key executive through retirement without offering ownership. A SERP promises an annual retirement income for 10 years if the executive stays until age 65.
A company wants to reward long-term loyalty and performance without increasing annual salary. A SERP offers a deferred bonus payable only after 15 years of service or upon retirement.
A business is seeking a way to incentivize its future CEO without granting stock or equity. A SERP provides a large beneﬁt payout that vests after 7 years, tied to performance milestones.

When to Consider a SERP

You’re looking to retain leadership for the long haul without offering equity
You want a customizable beneﬁt you can control — from who gets it to how it’s paid
You have stable proﬁts and can commit to funding future beneﬁt liabilities
You want to align long-term leadership with company performance and succession goals

How a Financial Advisor Can Help

Building the right retirement strategy — whether for yourself, your employees, or your key executives — is no longer a simple, one-size-ﬁts-all task. Between contribution limits, plan testing, tax implications, and compliance risks, the retirement planning landscape has become increasingly complex. But complexity also creates opportunity — if you have the right guidance.

A ﬁnancial advisor doesn’t just help you open a retirement account. They help you design a strategy that aligns with your income, business structure, employee goals, and long-term vision. They translate tax code into action steps, ensure your plan remains compliant, and guide you through changes as your business evolves.

Whether you're self-employed, scaling a team, or rewarding top talent, the right advisor helps you build a retirement plan that’s efﬁcient, strategic, and built to last.

The most important thing to know? You don’t have to ﬁgure it all out on your own. With a knowledgeable team by your side, you can move forward with clarity, conﬁdence, and a plan that truly works — for your future and your business.

Let's set up an initial call to help apply these principals to your business. You can do it directly by visiting www.calendly.com/jonowenscfp