Retirement Planning for Business Owners

If you own a business, your retirement plan is likely a lot more complicated and reliant on business success than your employed peers.

With considerations like business valuations, succession planning, and possibly relying on the sale of the company to fund your retirement, business owners face a unique set of challenges that demand careful strategy. Yet many remain unprepared.

Steps to a successful retirement

Define your ideal retirement

Without clear objectives, retirement planning can feel like navigating without a map. Setting specific goals around desired lifestyle, target retirement age, and income needs provides a strong foundation for an effective retirement plan. It’s equally important to revisit these goals periodically, as financial standing, business growth, or personal priorities may shift over time and require adjustments to stay aligned with long-term objectives.

Plan proactively

The sooner you, as a business owner, start planning for retirement, the greater the probability you’ll have the financial flexibility and security you want. Often, the business represents not only your primary income but also your largest asset, making it tempting to rely on its success alone for retirement. Yet even the best-laid plans can be affected by market shifts, business valuation changes, or unforeseen events. By proactively assessing and addressing retirement needs and re-evaluating them on a regular basis, you can diversify options, reduce your risk, and create a smoother transition out of active business life.

Review retirement plan options

If you offer your employees a benefit plan, you can cash in on those benefits as well. Choosing the right retirement plan depends on your business structure, the number of employees, and your retirement goals. There are several retirement plan options designed to fit different business owners and their operations:

• SEP-IRA: Suitable for small businesses with fewer than 20 employees, this employer-funded option allows contributions of up to $70,000 or 25% of compensation per eligible employee (as of 2025). It’s straightforward, offering the same percentage of contribution for each employee. For those aged 60 to 63 the maximum deferral is increased to $77,500.
• Solo 401(k): Ideal for sole proprietors or businesses with only a spouse as an employee, the Solo 401(k) offers flexibility by allowing both employer and employee contributions, with limits mirroring those of the SEP-IRA.
• 401(k) Plans: For businesses with multiple employees, traditional and safe harbor 401(k) plans offer employer and employee contributions, as well as tax credits up to $16,500 over the first three years to offset startup costs. For 2025, employees can contribute up to $23,500, with an additional $7,500 allowed for those aged 50 and older, and a combined employer-employee limit of $70,000. Vesting schedules and employer matching can also help attract and retain talent. For those aged 60 to 63 the catch-up provision is increased to $11,250 for a maximum deferral of $34,750.
• Safe Harbor 401(k): This 401(k) option exempts employers from certain compliance tests required by traditional 401(k) plans. However, employer contributions must be fully vested immediately. The contribution limits mirror those of traditional 401(k) plans.
• Roth 401(k): Unlike traditional 401(k) plans, Roth 401(k) contributions are made with post-tax income, allowing tax-free withdrawals in retirement. This option can be attractive for those anticipating higher tax rates later in life.

The sooner contributions begin, the greater the advantage of compound growth, creating a more robust retirement fund over time. Supporting both personal and employee retirement needs can enhance employee satisfaction and retention, benefiting the business and, therefore, you as a business owner. Consulting an experienced advisor can help you clarify options and benefits, finding the best choice for you and your business.

Diversify income streams

Industry fluctuations, demand, or business performance changes may impact your company’s market value, leaving a primary retirement asset vulnerable. To reduce dependency on the business alone, consider diversifying your income sources by creating a retirement portfolio with investments in stocks, bonds, or real estate.

Which investments you choose to add to your portfolio rely heavily on your specific situation. Before deciding, it’s important to get the right financial advice to maximize your resources and achieve your ideal retirement.

Build a retirement planning team

Effective retirement planning often requires a team of trusted professionals. Financial planners, CPAs, attorneys, and succession advisors bring essential perspectives to help navigate the complex financial, legal, and operational aspects of retirement. With Barnes Dennig Private Wealth Management, the perspectives of a financial planner and a CPA are combined through our Personal Financial Specialists (PFS) – a designation available only to CPAs. Regularly consulting with these advisors enables you to keep financial strategies up to date, adapt to changing tax laws, select investment opportunities, and the value of your business. This collaborative approach ensures that retirement plans remain aligned with your long-term goals.

Like any good business strategy, a well-crafted retirement plan provides stability, adaptability, and peace of mind. By taking a thoughtful, proactive approach, business owners can enter retirement with confidence.

Additional retirement planning resources

For more business owner financial planning tips, check out the library of free wealth management, investing, and retirement planning insights on our blog.

If you have more questions about how to get started building your retirement plan, we’re here to help. Our knowledgeable and experienced financial advisors will assist you in navigating the complex world of business owner retirement. Contact us today and let’s start building your better, brighter future – together.

Barnes Dennig Private Wealth does not provide tax or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or accounting advice. Please consult your own tax and accounting advisors before engaging in any transaction.

The material provided is for informational purposes only and does not constitute individualized financial advice. The publication of this material is not and should not be construed as the rendering of personalized investment advice.