Maximizing Small Business Retirement Plans for Tax Savings

Running a business means wearing a dozen different hats, often at once. Between juggling operations, marketing, clients, and maybe even a small team, retirement planning can easily fall to the bottom of the to-do list. But here’s the thing—smart retirement planning isn’t just about preparing for the future. It’s also one of the most powerful strategies small business owners can use to reduce taxable income, save money, and build long-term wealth.

At Straight Talk CPAs, we work with entrepreneurs, freelancers, and self-employed professionals who want to take advantage of every tax-saving opportunity available. One of the most overlooked? Retirement plans specifically designed for small businesses.

Whether it’s a SEP IRA, a solo 401(k), or another tax-advantaged account, these tools can help you lower your tax bill today while building a solid financial future. In this blog, we’ll break down how these plans work, who they’re best for, and how to make the most out of them—without the jargon or confusion.

Why Retirement Plans Are a Big Deal for Small Business Owners

Let’s get straight to it: retirement plans give you a legal way to set aside a chunk of your income—before the IRS takes a cut. And depending on the plan, those contributions can grow tax-deferred or even tax-free. That’s money working for you, not the government.

But beyond the tax perks, there's a bigger-picture benefit. Consistently contributing to a retirement plan builds discipline around saving and investing. Over time, it creates a safety net for the future and gives you more freedom in how (and when) you eventually step away from the day-to-day grind.



And yes—there’s a retirement plan for just about every kind of business owner out there.

SEP IRA: The Simple Route for Solopreneurs and Small Teams

What it is:
A SEP IRA (Simplified Employee Pension) is one of the easiest retirement plans to set up. It works a lot like a traditional IRA, but with much higher contribution limits. It’s a favorite among sole proprietors and small businesses with just a few employees.

Key benefits:

• Contributions are tax-deductible
• Easy to set up and low-cost to maintain
• You can contribute up to 25% of compensation or $69,000 in 2024 (whichever is less)
• Flexible contributions—great for fluctuating income years

Real-world example:
Let’s say a self-employed graphic designer pulls in $100,000 in net income. She can contribute up to $25,000 to a SEP IRA, shaving that amount off her taxable income. That’s real money saved on taxes—and an instant win for future retirement.



Who it’s great for:
Self-employed individuals and businesses with no or few employees. But one catch—if you do have employees, you must contribute the same percentage of compensation to their accounts as you do for yourself.

Solo 401(k): High Contribution Power for High Earners

What it is:
A solo 401(k), also called an individual 401(k), is designed for business owners with no employees (other than a spouse). It allows both employee and employer contributions, which means you can stash away more than with a SEP IRA in some cases.

Key benefits:

• Higher contribution limits—up to $23,000 as an employee (or $30,500 if you’re 50+)
• Add up to 25% of business income as an employer contribution
• Total contributions can reach $69,000 (or $76,500 with catch-up)
• Roth option available (for tax-free growth later)
• Loans are allowed (unlike SEP IRAs)

Real-world example:
Take a self-employed consultant earning $120,000. She could contribute $23,000 as the “employee” portion, then up to 25% of her income as the “employer.” That could total over $50,000 in retirement contributions for the year—all with major tax advantages.



Who it’s great for:
High-earning solopreneurs or married business owners working together. It takes a bit more paperwork than a SEP, but the savings potential is worth the effort.

SIMPLE IRA: For Small Businesses with Employees

What it is:
The SIMPLE IRA (Savings Incentive Match Plan for Employees) is ideal for businesses with up to 100 employees who want a retirement option that’s less complicated than a 401(k).

Key benefits:

• Easy to administer and low cost
• Employers are required to make contributions (either matching or fixed)
• Employees can contribute up to $16,000 in 2024 (or $19,500 if 50+)

Who it’s great for:
Business owners who want to offer a retirement plan to their team without the heavy lifting of a traditional 401(k). It’s a morale booster, too—offering retirement benefits helps attract and retain talent.

Solo 401(k) vs. SEP IRA: Which One Is Better?

Honestly? It depends.

Solo 401(k)s allow higher contributions for those with lower income and offer Roth options. They also allow loans and catch-up contributions for those over 50.

SEP IRAs, on the other hand, are incredibly easy to manage and work well if your income is consistently high and you don’t want to deal with much paperwork.



If you’re unsure, Straight Talk CPAs can help you run the numbers and figure out which setup makes the most sense based on your income, goals, and whether you plan to hire.

Bottom Line: Retirement Plans Are a No-Brainer for Smart Tax Strategy

If you’re looking to reduce your taxable income, invest in your future, and keep more of what you earn, setting up a retirement plan should be high on your priority list. It’s not just about saving for later—it’s about being intentional with your money right now.

And the good news? You don’t have to figure it all out on your own. At Straight Talk CPAs, we’ve helped hundreds of business owners structure retirement plans that work for their lifestyle, goals, and unique tax situation. Whether you’re looking at a SEP IRA, solo 401(k), or trying to sort through all the acronyms, we’re here to simplify the process and help you get the most out of every dollar you earn.

Need help setting up a retirement plan or want to know which one will save you the most on taxes?
Let’s talk. Our team at Straight Talk CPAs is ready to make retirement planning one of the easiest financial wins of your year.