Best Retirement Plans For Small Business With Employees


When it comes to retirement plans, it is not something to rush with if you own a small business. The reason for that is that you do not have to take care of your plan, but also provide it to your employees as well.

Also, we have to mention that there is a rise of self-employed people who are working from home these days. They need to create a unique plan that is different from common practices seen in big companies.  If you want to check out some of the best options for self-employed people, check out

It is very important to determine the right option since that will help you attract a better workforce. Also, you can meet some benefits from the IRS and many other advantages. Here are the best options for small businesses.

Individual Arrangement

This solution can be perfect for companies that have only a couple of workers since it will be much easier to determine the terms. A business owner can use this model to set the plan for both himself and his workers. However, keep in mind that there are some special rules, and consultations with experts are always necessary. There is a limit to how much you can contribute with this solution, and that is $6k per year.

The traditional model is where you can let your workers decide on much money they want to be deducted for this matter. A lot of people prefer this option. There is also a simplified pension solution. Your workers won’t have the same flexibility as with the first model, but the great thing is that the limits are significantly higher.

The negative side is that you will have to pay the same amount for each of your workers. Therefore, those in higher positions will have the same coverage as all other workers. The best option for companies that have less than 100 workers is to use a simple plan. It does not have any limits and all workers can decide on how much they want to contribute to it each month.

Defined Plan

In case you have more workers, and your company is expanding, this option might be the right solution. You can choose to implement a standard 401k plan or a traditional one. However, this option can apply only to a business owner that is also getting a salary in his company.

When it comes to the traditional model, it is the most popular option. The main advantage is that it will let people choose a higher coverage if they want. Also, it is easier to control how much money you are spending. Before you choose this option, be sure to check some important features related to additional fees. Workers can choose the amount that will be deducted each month.

Also, you can use software and set automation that will help you deal with this process much easier. The biggest benefit is that the limits are much higher when compared to other solutions. When it comes to the most recent updates, people up to the age of 50 can spend up to $20k, while that limit is even higher for older people who are getting close to retirement, which is $26k.

Variations of Traditional Plan

We are going to start with the safe harbor, which is a model where you can set the limits to be much higher when compared to any other model. However, there are some important factors that can affect this option, such as the amount of money your company is spending on workers, the structure of the contribution system, and various limits. The great thing is that the limit is up to $65k, and that is especially good for people who are getting close to retirement since that can significantly improve the monthly installments they are going to get.

We already mentioned that there is a rise in small businesses with only one employee who is also the owner of the company. Self-employed people are often working with clients from the whole world by using short-term contracts, and they cannot specify the average monthly income.

Therefore, the best solution for them is to use the solo retirement model where they can contribute different amounts each month. The downside is that the limit is lower, and it is only around $20k. However, after reaching the age of 50, the limit can go up to over $60k.

What is the Best Solution?

It depends on various factors. For instance, if you don’t have workers in your company, the best option is a simple self-employment plan. Those with a couple of workers should use the simplified pension structure, while the standard model is the best for companies with more than 100 people. There are some important differences as well.

When it comes to the first model, you can set the amount on your own, while the second one is controlled by the owner of the business. Also, we have to mention the important difference between the first two, and that is related to the withdrawal options, which is not possible for the first one until you reach the age of 60, while you can do that at any moment with the second one. Also, maintenance is much easier when you are using the simplified pension.

Last Words

The main reason why you should learn more about different solutions related to a retirement plan is that it will help you choose the best solution according to your preferences, but also allow your workers to be more flexible and contribute more money if they want to. The limits play the main role in making this decision, and they are quite different between these plans.

Therefore, if you want a higher limit, a standard solution is the best choice. However, if you want a simplified mode, the simple plan is the right thing for you, but the limit will be under $20k. In that matter, don’t rush with your decision and be sure that you are making a choice that will make your workers satisfied as well.