Leverage tax-advantaged retirement accounts: Utilize tax-advantaged retirement accounts specifically designed for businesses. There are many options to choose from that offer various benefits, such as tax deductions, various contribution limits, and flexible design options. Taking advantage of these accounts can help reduce your taxable income while accelerating your retirement savings growth. There are a number of different retirement plans available to businesses. Some of the most popular options include:

Traditional IRA: The most basic of the retirement plans, IRAs allow you to save for retirement on a tax-deferred basis. This means that you can contribute money to your traditional IRA before taxes are taken out, and your investment earnings will grow tax-deferred until you withdraw them in retirement. The annual contribution limit for traditional IRAs is $6,500 in 2023 or $7,500 if you're age 50 or older. However, if you are married, filing jointly, and making more than $129,000, you cannot make tax-deductible contributions.
Roth IRA: A Roth IRA allows you to contribute after-tax dollars, but your withdrawals in retirement will be tax-free. The same contribution limits apply here as traditional IRAs. However, the income limits for contributions are higher for married filing jointly at $228,000.
SEP IRA: A plan designed specifically just for business owners. A SEP IRA or Simplified Employee Pension allows you to make larger contributions than a traditional or Roth IRA, $66,000 or 25% of earnings (whichever is less). This type of plan works great for sole proprietors or businesses with only a few employees. Because the contributions are employer-only, meaning you cannot make salary deferrals or individual contributions, this can become quite costly if the business owner wants to max out with many employees.
SIMPLE IRA: A Savings Incentive Match Plan for Employees (SIMPLE) is a retirement savings plan that is designed for small businesses. SIMPLE IRAs allow employees to save money from their paychecks before taxes are taken out. Employees can contribute up to $15,500 this year with an extra $3,500 if 50 or over. Further, employers can contribute either a matching contribution of up to 3% of employee compensation or a non-elective contribution of 2% of employee compensation. However, once the business has over 100 employees, you can no longer maintain the SIMPLE plan.
Individual or Solo 401(k): This type of 401(k) plan is designed for self-employed individuals with no employees other than a spouse. It allows you to contribute more than you can with a traditional or Roth IRA and no income limitations. Just like with a SEP you can potentially contribute $66,000; however, in this case, you are wearing two hats, one as a participant and the other as the owner. As an employee, you can contribute up to $22,500 in 2023 or $30,000 if you're 50 or older. As an employer, you can contribute up to 25% of your net self-employment income, up to a maximum of $66,000 in 2023.
401(k) Plan: Probably the retirement plan that most Americans are familiar with. Like SEPs, SIMPLEs, and Solo(k) plans, this plan offers people the opportunity to save for retirement. It also offers the business the most flexibility in plan design when it comes to eligibility, employer contributions, Roth and pre-tax deferrals, loans, and hardship withdrawals. However, it does come with some administrative tasks and costs not generally present in other plans. In 2023, the contribution limit for 401(k)s is $22,500 plus an additional $7,500 for employees age 50 or older. In addition to any matching contributions, employers also have the ability to make non-elective, or sometimes referred to as profit-sharing, for a total of $66,000.

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6 retirement plans small business owners should consider: Know your options

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