June 17, 2024

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What Small Business Retirement Plans Are Available?

3 min read
Retirement Plans Are Available

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According to the U.S. Census Bureau 2019 report, small businesses make up 98.1 percent of all employer firms in the United States. This means most businesses in the United States are small-scale.

While small businesses are a vital part of the economy, they often do not have the same resources as large businesses, which means it’s difficult for SMEs to cater retirement plans to their employees. However, there are a few different types of retirement plans designed for small businesses.

Small Business 401(k) Plan

A 401(k) is a tax-advantaged account designed to help employees save for retirement. With this type of retirement plan, employees can contribute pre-tax earnings, and the money grows tax-free. More importantly, employees can elect to have part of their paycheck deposited automatically into their 401(k) account.

The funds are then invested in stocks, mutual funds, bonds, and other profitable ways. It’s also worth noting that participants enjoy tax-deferred growth on their investment, meaning they won’t have to pay taxes on the money until they retire.


Specifically designed for small businesses, this plan allows employees to make tax-deferred contributions to an individual retirement account (IRA), and employers are required to make matching or non-elective contributions. This type of plan is an excellent way for small businesses to provide retirement benefits for their employees without the hassle and expense of a traditional 401(k) plan.

For employees, this plan offers the ability to save for retirement on a tax-deferred basis, which can lead to significant tax savings over time. For employers, it is an affordable and easy-to-administer retirement savings solution

A Simplified Employee Pension (SEP) plan

This is a retirement savings plan that can be established by small businesses and self-employed individuals. A SEP IRA offers the same tax advantages as a traditional IRA, but it has higher contribution limits and fewer administrative requirements.

Since SEP IRAs are funded with pre-tax dollars, it means that contributions are deducted from an individual’s taxable income. As a result, there will be significant tax savings in the year when the contribution is made. With a SEP IRA, businesses can provide their employees with a retirement savings benefit without incurring any significant administrative costs or burdens.

Why An SME Retirement Plan Is Important

One of the biggest advantages of offering small business retirement plans is that it can help you attract and retain top talent. Employees are increasingly looking for employers who offer good benefits, and a retirement plan is seen as being one of the most important benefits a company can offer. If you’re looking to attract the best employees, then offering a retirement plan is essential.

Another importance of an SME retirement plan is to help you save on taxes. By contributing to your employees’ retirement accounts, you can deduct the contributions from your business taxes. This can significantly reduce your tax bill, which eventually frees up more funds so that you can invest back into your business.


There are a few different types of small business retirement plans available, including the 401(k) plan, the SIMPLE IRA plan, and the SEP-IRA plan. These plans offer a variety of benefits to both employers and employees, making them an essential part of any small business. If you’re aiming toward attracting and retaining top talent, then offering a retirement plan is essential.

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