Which Business Retirement Plan Wins for Your Business?
SEP IRA vs. 401(k): Which Retirement Plan Wins for Your Small Business?
For many entrepreneurs, the business is often considered the retirement plan. However, relying solely on the eventual sale of your company is a risky strategy. Diversifying wealth into a dedicated retirement plan is essential, but for small business owners in 2026, the choices can feel overwhelming.
The SEP IRA: Simplicity and High Limits
The Simplified Employee Pension (SEP) IRA is often the first choice for solopreneurs and very small teams.
Pros:
Easy to set up and maintain.
Minimal administrative costs and paperwork.
Flexible contributions: you can contribute up to 25% of eligible compensation, with a maximum of $70,000 for 2026.
Considerations:
If you have employees, you must contribute the same percentage of salary for all eligible employees.
Contributions are employer-only, meaning there’s no employee deferral option.
Contributions are pre-tax, lowering current-year taxable income.
The Solo 401(k): The Power of the “Double Dip”
For business owners with no employees (other than a spouse), the Solo 401(k) is often the superior vehicle.
Key Features:
Employee contribution: Up to $24,500 in 2026 ($31,000 if age 50+ for catch-up contributions).
Employer contribution: Up to 25% of compensation.
Total combined contributions can reach $70,000 ($73,500 if 50+).
Benefits:
“Double-dipping” allows faster contribution growth.
Roth Solo 401(k) options may be available, providing tax-free growth and withdrawals.
Loan provisions may be included in some plans, offering additional flexibility.
The SIMPLE IRA: For Small Teams with Fewer Than 100 Employees
Another option for small businesses is the SIMPLE IRA:
Employee deferral: Up to $15,500 in 2026 ($19,000 if 50+).
Employer contribution: Either a 2% nonelective contribution for all employees or a 3% matching contribution.
Pros: Low administrative burden and employee participation is straightforward.
Considerations: Lower contribution limits than SEP or 401(k), making it better suited for businesses with smaller payrolls or those seeking simplicity.
SECURE 2.0 Impact in 2026
Small businesses with fewer than 50 employees may receive a tax credit covering up to 100% of administrative costs for the first three years of a new plan.
Certain provisions also simplify employee auto-enrollment and catch-up contributions, increasing flexibility for both employers and employees.
Choosing the Right Plan
At BDB Wealth Advisors, we help business owners:
Compare contribution limits and potential growth between plan types.
Evaluate tax efficiency today versus long-term retirement benefits.
Factor in employees, payroll, and administrative considerations.
The right retirement plan not only protects your future but can also serve as a valuable recruitment and retention tool for your team.
Take Action
Don't choose between personal wealth and business growth.
From Solo 401(k)s for owners to SIMPLE IRAs for growing teams, your 2026 retirement strategy should serve your entire vision. Let BDB Wealth Advisors help you select the right vehicle to minimize your tax bill and maximize employee loyalty.
Click here to start your 2026 Plan Review
Disclaimer
BDB Wealth Advisors is a Registered Investment Advisor (RIA) and is not a licensed CPA or tax preparer. This post is for educational purposes only and does not constitute individualized tax advice. We recommend consulting a qualified tax professional before implementing any retirement plan strategies. BDB Wealth Advisors can work alongside your tax advisor to ensure your business retirement plan is optimized for your goals.