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SEP-IRA vs 401(k) For Small Business Owners – Which Is Best For You?

There are many ways to save for retirement, and the possibilities extend greatly for small business owners. What are some of your best options? Discover the benefits of SEP-IRA and 401(k) accounts for small business owners before reaching out to Maggi Tax for retirement planning services near you!


A Brief Summary – Reviewing the Similarities and Differences


What does it matter where you put your retirement savings? Each type of account has its benefits, and it just so happens that SEP-IRAs and 401(k)s are a couple of the most recommended for small business owners and even those who are self-employed. Both are tax-deferred, and both can be used to open up retirement accounts for your employees as well.


Did you know that you can contribute to a SEP-IRA and a 401(k) if you’re self-employed?


The main difference between these two options is that SEP-IRAs are rather simple and straightforward whereas 401(k)s have more room for flexibility in your contributions. Let’s take a closer look at what that means for small business owners:


For Easy And Simplified Retirement Planning, SEP-IRAs Are There For You


SEP-IRAs were made specifically for small business owners as an easy way to benefit from retirement savings accounts. This applies to both the business owner and their employees. Funded by employer contributions, up to 25% of the business’ income can be saved up in a SEP-IRA. This method is commonly preferred for being an easy and simplistic way of saving funds for retirement without much additional management.


While employers can establish SEP-IRA accounts for their employees, they also have the right to exclude part-timers or those who are under 21 years of age.


Like More Control Over Your Savings? Solo 401(k)s Has You Covered


The easy route may be nice, but it doesn’t always get you the most out of your savings. For those who want to maximize their earnings for a larger payout, 401(k)s allow greater flexibility with contributions. The best example of this is that employees are able to save up to 100% with employer contributions of up to 25%. Even as a small business owner with no employees, you can still receive the employee benefits of a 401(k) with Solo 401(k)s. These benefits include:

  • Catch-up contributions
  • Roth contributions
  • Employee deferrals
  • Loan provisions


Learn more > Can I Contribute to Multiple 401(k)s at the Same Time?


How Can I Move Forward With My Preferred Savings Plan?


Does one retirement plan appeal to you more than the other? Or are you still not sure which one is right for you and your small business? Either way, consulting with a trusted retirement planner near you can give you the insight you need to make a smart decision. Maggi Tax carries years of practice in retirement planning and tax strategies to help small business owners like you get the most out of your savings!


Check out our tax guide for self-employed entrepreneurs for more helpful information on running your business with greater expertise.


Maggi Tax Can Help Set Up Your Small Businesses’ Retirement Plan!


Call Maggi Tax today at (727) 799-1701 to get started with a consultation to discover the best retirement plan for your small business! We’ll go over every aspect of your business and find the best solution to fit your needs and goals.


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