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[00:00:00] Most business owners treat retirement like a someday problem until someday shows up and the numbers do not work.

You may be making good money, maybe even great money, but the question is: are you keeping enough of it, and are you putting it in the right place?

Because the wrong retirement plan does not just cost you growth. It can cost you tens of thousands of dollars in unnecessary taxes.

Today, I have Matt Ruttenberg from Life Inc. Retirement Services here to break down what your small business retirement plan options are, how to choose the right retirement plan, and how to stop guessing when it comes to your future.

Matt, welcome back to the show.

Thanks, Mike. I appreciate it. Always a pleasure.

It is always fun having you on and bringing great ideas around retirement planning for business owners. As everyone knows, Matt is our go-to for anything related to business retirement plans, so I appreciate you taking the time.

[00:01:00] Let’s dive in. When we are talking with small business owners, what do they need to know about retirement plans? How do we evaluate what retirement plan options they have? What do the costs look like? We are going to dive into all of that.

To start broadly, what retirement plan options are available to business owners today?

From a high level, there are a lot of options. In the IRA world, there are SEP IRAs and SIMPLE IRAs. For more structured group plans, there are 401(k) plans, including solo 401(k)s, traditional 401(k)s, and safe harbor 401(k)s.

Then we can get into defined benefit plans, which allow a higher tier of contributions. Beyond that, there are executive retirement plans where you can focus on specific employees inside your organization.

There are many options, and inside each one of those retirement plan options, there are even more choices.

[00:02:00] When a business owner comes to you and says, “I am looking to set up a new retirement plan,” whether they have employees or not, what questions do you ask to help determine which plan is right for them?

That is a great question because many business owners start by doing their own research. That is great, but they often start looking into every single option available.

What we try to do is narrow it down and educate them on which small business retirement plans make the most sense for their situation.

It really comes down to two, maybe three, questions. The first question is: what is the priority? Why do you need this plan?

Is it for you as the business owner because you have been reinvesting in the business and now want to diversify into a retirement strategy? Is it for tax savings? Or is it mainly for your employees because you need a better employee benefit or your state is mandating a retirement plan?

Each answer takes us down a different path.

[00:03:00] The second question is about you as the business owner. What do you want to contribute into your portion of the plan?

That answer builds the next layer of the retirement plan strategy.

When we are talking to small business owners who are looking at retirement plans as a tax strategy, we often go to that second question too: how much do you want to put away?

That helps determine the best retirement plan. We do not want to build the most robust plan if it is not what they need or if it does not match the amount they want to contribute. You can always grow into something more advanced later.

When I first became a business owner, I delayed retirement planning because I did not know what plan to choose. I also did not know how much I wanted to put away, and I did not know how easy it would be to move from one type of plan into another later.

[00:04:00] Let’s talk through that. If the plan is for the owner, the employees, or both, what retirement vehicles should business owners consider?

Let’s start with the journey of a business. When you first get started, you may need to recruit and retain talent. You are competing for clients, but you are also competing for employees.

If the answer is, “I am doing this for my employees,” then you may look at a traditional 401(k). With a traditional 401(k), you have more control. You do not necessarily have to offer a match, and cost is an important factor.

There are administrative costs, but there is also the cost of the match and how much you are giving to employees. With a traditional 401(k), you can structure it. You could offer no match, or if you do offer a match, you can use a vesting schedule to encourage longevity in the organization.

[00:05:00] Another option may be a state-mandated retirement program. There are several states that have company-level retirement programs run by the state. These are usually like a group of IRAs where you send employee contributions to the state program.

There is no employer match in those state programs, and you cannot put your own employer money into them. The investment options may also be limited, but it is still an option.

Another option is a SIMPLE IRA. A SIMPLE IRA sits somewhere in the middle. The employer cannot put a huge amount into it, but it can be a simple way to get started. Employees can contribute their own money, and the business can make a small match or contribution. It can also be handled through payroll.

That makes sense. So if you have employees, some options include a traditional 401(k), a SIMPLE IRA, and potentially a safe harbor 401(k).

[00:06:00] A safe harbor 401(k) usually comes into the conversation when the plan is for the owner or for both the owner and employees.

The reason business owners use a safe harbor 401(k) is because it follows a set of IRS-approved options. Once you choose a fair plan for employees and provide a strong retirement benefit, the owner may be able to max out their employee contribution amount.

In 2026, that employee contribution limit is $24,500. A safe harbor 401(k) can allow the owner to max fund their employee contributions regardless of what employees are doing.

If you go the traditional 401(k) route, there is annual testing. The employer may be limited in how much they can contribute because the plan has to pass annual compliance testing.

[00:07:00] So if you have employees, options may include a traditional 401(k), safe harbor 401(k), and SIMPLE IRA.

What about business owners who do not have employees yet, or who only have family members, contractors, or part-time workers? What retirement plans should they consider?

If you do not have eligible employees, the decision is easier. The first question goes away because we know the plan is for you as the owner.

Then the main question becomes: how much do you want to contribute?

If it is only a few thousand dollars, an IRA or Roth IRA may be enough. You do not have to create a more robust business retirement plan.

[00:08:00] If you want to contribute around $20,000 or less, a SIMPLE IRA may still be part of the equation. You do not have to have employees to have a SIMPLE IRA.

Then we get into the solo 401(k). A solo 401(k) has the same structure as a 401(k), but testing is much easier when there are no employees. If you want to contribute more than a SIMPLE IRA range, but still stay under the higher plan levels, a solo 401(k) can be a strong option.

If you want to contribute even more, that is when a defined benefit plan may come into the conversation. A defined benefit plan can be used with employees, but it can also be powerful for business owners without employees.

[00:09:00] This is similar to how we talk about retirement planning from a tax strategy perspective. We want business owners to understand what the plan may do for them and what the potential tax savings could look like.

It often starts with the same question: how much do you want to put away?

If someone wants to contribute $5,000 or $6,000, we do not want to overcomplicate things. They may not need a robust plan yet. We want them to get into a plan that fits them today and then grow into something more advanced later if needed.

For a business owner with no employees who wants to contribute $7,000 or less, a traditional IRA or Roth IRA may be enough. If they want to contribute around $7,000 to $20,000, they may look at a SEP IRA or SIMPLE IRA.

[00:10:00] If the amount is above that, then a solo 401(k) may make sense.

If the business has employees, we still ask the same question: how much do you want to contribute? If the amount is lower, a SIMPLE IRA may work. If the owner wants to contribute $20,000, $30,000, or more while also offering a plan to employees, a safe harbor 401(k) may make more sense.

That is exactly the process. It all comes down to what the owner wants to do. Sometimes we speak with HR, a CFO, or a manager who is looking for pricing, but pricing is only one part of the equation.

We need to know what the owner wants from the plan. Then we can work backward into the right plan design.

[00:11:00] If the plan is incorrect, you may end up giving too much. There is the cost of the plan itself, but there is also the cost of what you are giving to employees. That is why it always comes back to what the owner wants to accomplish.

Let’s talk about time commitment, maintenance, and administration. This is another area where business owners can get nervous.

If a business owner sets up a SIMPLE IRA, SEP IRA, traditional 401(k), solo 401(k), or defined benefit plan, what does the ongoing time involvement look like?

For a business with no employees, it often comes down to when you want to contribute. With a SIMPLE IRA, for example, contributions can be withheld from your paycheck and submitted to the investment company.

[00:12:00] If you have employees, the commitment is more about making sure you are taking care of them properly.

A 401(k) administrative company handles compliance, annual testing, and filings. But there is still a day-to-day part of the process.

For example, if employees want to contribute 3% or 5% of their paycheck, that needs to be set up in payroll. The amount is withheld from the paycheck and then sent to the 401(k) recordkeeper.

There are many payroll integrations available today, which can make this process easier. Once the employee’s deferral is set up, the funds can automatically be sent to the 401(k) recordkeeper.

[00:13:00] After setup, the business owner is mostly monitoring the process and making sure changes are handled properly. The hardest part is usually the initial setup: gathering company information, recordkeeper information, payroll details, and plan documents.

Once the plan is up and running, much of the work is front-loaded. After that, there may be annual compliance checks and filings, often handled by the administrative company.

[00:15:00] Let’s talk about cost. This can be another sticking point for small business owners.

Many business owners hear “401(k)” and think it is only for large companies. But 401(k) plans are not only for massive companies. They can also work for small businesses, and even for solo business owners.

What do the costs look like for a SIMPLE IRA, SEP IRA, or 401(k)?

With a traditional IRA or Roth IRA, you may set it up yourself or work with a financial advisor. With a SIMPLE IRA, there is generally no administrative cost because it is an IRA.

[00:16:00] In a 401(k), there are usually three roles involved.

The first is the administrative company, which handles compliance, annual testing, and annual filings.

The second is the financial advisor or investment fiduciary. This may be a financial advisor, a retirement company, or in some cases, the business owner if the plan is self-directed.

The third is the recordkeeper, which acts like the custodian and holds the money.

With an IRA-based retirement plan, there is no administration needed in the same way. The main cost may be investment management, financial advisory fees, or employer contributions to employees.

[00:17:00] Once you move into the 401(k) world, administrative costs are added because a 401(k) plan needs an administrator.

Generally, there may be a setup cost somewhere around $1,000 to $2,000 depending on the provider. For a business with around 10 employees, annual costs may be around $3,000 to $4,000 per year across administration, recordkeeping, and advisory roles.

The more employees you have, the more the cost may increase. Often, part of the cost is flat and part is based on eligible or participating employees.

In general, you should only be paying for employees who are participating in the plan, not necessarily every employee on payroll.

[00:18:00] There are some payroll platforms that may charge for every employee, whether they participate or not. That is something business owners should look at when comparing retirement plan providers.

Let’s talk about working with a custom retirement plan provider versus using a standard online option or one tied to payroll.

When I first started a 401(k), I used the option connected to my payroll software because I assumed all 401(k)s were the same. But that is not necessarily true.

[00:19:00] Not all 401(k)s are created equal.

The plans connected directly to payroll can be like an easy button. They are easy to implement because the payroll company already has much of your information.

On the other side, there is a more custom model.

There are prototype and non-prototype plans. A prototype plan is more boilerplate. It uses a document that the company files for many clients, and your information is plugged into the document.

A custom or non-prototype plan is filed individually for each client. That allows more flexibility.

[00:20:00] The reason to use a custom model is flexibility. Businesses change. A company may have an up year, a down year, hire more employees, adjust its match, or change its plan design.

A custom retirement plan allows the plan to be designed around the company instead of forcing every business into the same structure.

If the priority is the business owner, and the plan is being used as a tax strategy, a custom model is often worth considering.

A simpler payroll-based plan may still be fine if the goal is to give employees a basic retirement benefit, satisfy a state mandate, or get started without much complexity.

[00:21:00] The cost difference between a simple payroll-based plan and a custom plan may not always be as large as business owners expect because convenience fees can be involved.

A basic option may be a good starting point, but it can limit plan design flexibility.

If you already have a 401(k) and want to move to another provider, it is important to transfer the plan instead of closing it completely.

You do not want to shut down your 401(k) and then open a new one, because there can be a required waiting period before starting another plan. That can lead to lost tax deductions.

[00:22:00] The better approach is to communicate with the new provider and go through the transfer or deconversion process properly.

This is another reason to understand the plan’s purpose. Is it for you? Is it for your employees? Is it just to get started? Are you using it for tax savings? The answers matter.

Another benefit of certain plan designs is the ability to self-direct.

A self-directed 401(k) or self-directed IRA may allow you to invest beyond the standard investment menu offered by major custodians. Depending on the plan and custodian, you may be able to invest in real estate, private lending, alternative assets, crypto, or other investments.

[00:23:00] This flexibility can be useful for business owners who want to use retirement funds for investments outside of traditional funds. For example, if you want to invest in real estate, a self-directed retirement plan may give you a way to use retirement funds instead of coming out of pocket personally.

Self-directed retirement plans are not right for everyone, but they can be a useful tool in the right situation.

With a prototype plan, self-directed options may not be available. Self-directed does not simply mean choosing your own investments from a limited menu of funds. A truly self-directed plan gives you broader investment flexibility.

[00:24:00] There are different levels of self-directed investing. At a higher level, that might include real estate, private lending, or syndications. At a simpler level, it may mean more freedom with stocks and bonds beyond a limited plan menu.

Which options are available depends on the custodian or recordkeeper.

That creates a third question in the retirement plan decision process: how do you want to invest?

The first question is who the plan is for. The second is how much you want to contribute. The third is how you want to invest.

[00:25:00] There is also a strategy called a ROBS 401(k), which stands for Rollovers as Business Startups.

A ROBS 401(k) can allow someone to roll retirement funds into a new business and buy shares of that business without creating a taxable event.

For example, someone leaving a job with a large 401(k) balance may be able to roll those funds into a ROBS 401(k) and use that money to fund a new business.

The downside is that as the business hires employees, the owner generally has to offer the same plan benefits to eligible employees. A rule of thumb is that what you offer yourself, you also need to offer eligible employees.

[00:27:00] Let’s talk about retirement plan tax credits under SECURE 2.0.

These credits can be a major incentive for business owners who are on the fence about setting up a retirement plan.

Plans starting January 1, 2023 or later may qualify for certain SECURE 2.0 tax credits. There are three major credits to know: the contribution tax credit, the administrative tax credit, and the automatic enrollment or opt-out credit.

For plans starting in 2025 and later, certain plans may include an opt-out structure. That means employees are automatically enrolled unless they opt out. There may be an extra $500 tax credit connected to that feature.

[00:28:00] The administrative tax credit may provide $250 per eligible employee who is enrolled in the plan. For example, if you have 10 eligible enrolled employees, that could be $2,500 toward administrative costs.

If you add the $500 opt-out credit, that could be $3,000 in credits before even considering the contribution credit.

The contribution credit can be even more significant. It may provide up to $1,000 per year for certain employees to help offset the employer match or contribution.

With 10 employees, that could potentially create $10,000 in contribution credits, plus the administrative and opt-out credits.

These credits can apply over several years, though the amount may decrease over time.

[00:29:00] When these tax credits are paired with the deductions from employer contributions, some small business retirement plans may come close to net zero cost in the right situation.

The government wants businesses to help employees save for retirement. Tax credits are one way businesses are being incentivized to set up retirement plans.

Now let’s talk about key timing considerations. When do small business retirement plans need to be set up, and when does funding need to happen?

[00:30:00] Some 2025 retirement plans may still be available if the business filed an extension. In some cases, business owners may still be able to implement and contribute toward 2025 plans to offset taxes.

For a fresh 2026 plan, safe harbor 401(k)s and SIMPLE IRAs generally need to be up and running by October 1.

October 1 is an important deadline. If you miss it, you may need to push the plan to the following year and potentially miss out on significant tax savings.

A traditional 401(k) may generally be implemented by December 31.

[00:31:00] The key takeaway is that retirement plan setup takes time. You need time to choose the right plan, complete documents, coordinate payroll, and implement the plan correctly.

If you have not figured out your plan by mid-year, it is time to start the conversation.

If you already have a retirement plan and are not sure whether it is right for your business, it may be worth reviewing it. You may be able to move into a plan that is more beneficial for your tax strategy, contribution goals, or employee structure.

[00:32:00] Retirement planning does not have to be complicated, but ignoring retirement planning can be expensive.

If you miss deductions, wait too long, or assume your business will be your only retirement plan, you may put yourself in a difficult position later.

Even if your business eventually sells, having retirement savings gives you a backup plan. No business owner will complain about having an additional source of retirement savings.

The right small business retirement plan can create tax savings, employee benefits, and a stronger financial future.

[00:33:00] If you want help from a team of tax professionals implementing retirement strategies and other tax-saving strategies, visit TaxElm.com or click the link in the description to book a free discovery call.

We help small business owners legally lower their tax bills every day.

Thanks for tuning in to the Small Business Tax Savings Podcast. We hope today’s episode sparked useful ideas to help you save on taxes and grow your wealth.

For more tax-saving resources, visit TaxSavingsPodcast.com. There, you will find tools, guides, and information to help you reduce taxes and improve your business finances.

The insights shared here are for educational purposes only and are not specific tax, investment, or legal advice. Always consult with a qualified professional for your unique situation.

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