A. The answer is it depends because there are multiple retirement plan options for a small business owner to choose from, below is a general guideline -
- For employers with a long-term horizon to fund a plan for their employees, defined contribution plans work well.
- For sole proprietors or small business owners wishing to minimize administrative costs, a SEP or SIMPLE plan may be the best choice.
- For small business owners without employees wishing to maximize contributions, a Solo-401K may be the right plan.
- Profit sharing is appropriate if discretionary contributions or a vesting schedule are important.
- For employers with older key employees, defined-benefit plans may be more appropriate.
- For employers that wish to have their employees fund a portion of the retirement cost, a SIMPLE or 401K plan may be the most suitable.