Which Retirement Plan Is Right for Your Business?
August 30, 2026 • By David Little, CFA, CFP®
As a business owner, you face countless decisions daily that can have ripple effects on the people around you and your business. Perhaps one of the most important decisions you can make is which retirement plan you choose. Picking the right retirement plan, whether you are a sole proprietor of a new venture or the CEO of a well-established company with employees, can have the power to attract the right talent, keep that talent, and set everyone up for success.
This article aims to highlight some of the main questions that you should ask when choosing a retirement plan. These questions include:
How many employees do you have?
How much do you want to be able to save?
Are you willing to navigate complexity?
So what plans are even out there?
Traditional 401(k)
A traditional 401(k), usually just referred to as a 401(k), is a commonly used plan for larger or growing businesses. This plan allows for high employee contribution rates, generous employer contributions, and a high level of customization, depending on the company’s size, goals, and needs. All of this works together to attract great talent and incentivize them to stick around. There are ways to set up your plan to allow loans or Roth contributions, which are often selling points for employees compared with simpler plans.
The flip side is that these strengths bring complexity, and complexity brings administrative costs. This plan requires compliance testing and oversight, but if it is the right fit, the benefits far outweigh the negatives.
Individual 401(k)
The individual 401(k) — or solo 401(k) or i401(k) — has similar characteristics to the traditional 401(k), with one main difference: You must not have any other employees (a spouse is an exception to this as well as a few others). The i401(k) is designed to give you the ability to save at a high rate, even if you are the only employee, as well as enjoy many of the same benefits and customizations of the traditional 401(k) format. You can contribute as an employee and an employer, which makes this a very attractive plan for sole proprietors, independent contractors, and others working solo. The complexity and administrative costs are also extremely low for an i401(k) plan.
Simplified Employee Pension IRA
If you are the type of owner for whom complexity is a hurdle to starting a plan, the Simplified Employee Pension (SEP) IRA is a plan to consider.
A SEP is quick and easy to set up and allows for strong savings. A defining characteristic is that funding only comes from the employer. There are no employee contributions. This plan has fewer requirements when it comes to contributions and lends itself to more flexibility, meaning that in higher-earning years, contributions can be higher, while in lower-earning years, contributions can adjust down proportionately.
The downside is that for larger companies, this type of model can become expensive. A SEP often suits smaller or single-employee companies that value simplicity and ease of management.
Savings Incentive Match Plan for Employees
A Savings Incentive Match Plan for Employees (SIMPLE) IRA shares characteristics with 401(k) plans, as it includes both employer and employee contributions. However, a drawback is that the contribution limits for these plans are lower than those for a 401(k) or a SEP. The flexibility of contributions is also pretty low, as you must make an annual funding decision at the plan’s inception, and follow that rule ongoing. This plan can be a good fit if you want to somewhat mimic the 401(k) model but with much less complexity.
Personal Defined Benefit Plan
A personal defined benefit (DB) plan is unique in its approach. This plan focuses on what gets paid out from it in retirement based on a formula and defines what that benefit will be at that time, rather than relying on growth from employee contributions.
This plan is complex and is used less often than the others for that very reason. There may be enough of an argument for it if you have enough high-earning employees seeking retirement income benefits above and beyond what the other plans discussed here can provide. This plan mandates funding by the company using an actuary and does not allow for employee contributions, putting the burden solely on the company. This is one of the reasons many companies have shifted away from this model.
This type of plan is often used to attract not only great talent but also highly compensated talent, and may be appropriate for a well-established, successful company with highly compensated employees.
Final Thoughts
When it comes to choosing a retirement plan for your business, consider the above options. It is important to consult a tax professional, your financial advisor, as well as a professional that specializes in these types of plans. Choosing the right plan takes a team that truly understands your goals for your company, values, and specific situation.
Please feel free to schedule a complimentary call with one of our fee-only financial advisors to discuss your situation and whether we may be a good fit for you.