The Right Retirement Plan Can Change Everything, But Only If You Have One

The Plans Available to You And What You Can Still Do This Year

As a business owner, planning for retirement is one of the most consequential financial decisions you'll make, not just for your own future security, but for your ability to attract and retain the talented people who help your business grow. This newsletter launches a new series we're dedicating entirely to retirement plans for business owners. Our goal is simple: cut through the complexity, give you the information you actually need, and help you take action before the windows close. And right now, with just a few months left in 2026, there are still meaningful opportunities available. Which plan is right for your business? The answer depends on your business size, how much you want to contribute, how much administrative burden you're willing to manage, and whether you want employees to participate alongside you. Here are the four most common plans.

SEP IRA

The Simplified Employee Pension IRA is exactly what its name suggests — a simplified, employer funded retirement account that gives business owners a straightforward path to large, tax-deductible contributions. The employer contributes directly into a SEP IRA for themselves and for any eligible employees. There are no employee deferrals, no nondiscrimination testing, no Form 5500 to file, and no annual compliance requirements to speak of. You open it, contribute when you want, and that's it.
 
The numbers: In 2026, you can contribute up to 25% of eligible compensation or $72,000 per person, whichever is less. The compensation cap is $360,000. Contributions are entirely discretionary, meaning you can contribute the maximum in a great year and nothing at all in a difficult one.
The catch: Contributions must be the same percentage of compensation for every eligible employee as you contribute for yourself. For a solo business owner or a business with very few employees, this is a non-issue. For a business with a larger workforce, it can make the SEP IRA expensive.
 

SIMPLE IRA

The Savings Incentive Match Plan for Employees IRA is designed specifically for small businesses with 100 or fewer employees. Unlike the SEP IRA, the SIMPLE IRA allows both the employer and employees to contribute. Employees elect a deferral amount from their paycheck and the employer is required to contribute on top of that. The employer contribution is mandatory, and you choose between two formulas:

Match option: Match 100% of employee deferrals up to 3% of their compensation (can be reduced to 1% in two out of every five years)
Non-elective option: Contribute 2% of compensation for all eligible employees, whether they contribute or not.

The numbers: In 2026, employees can defer up to $17,000, with a catch-up of $4,000 for ages 50–59 and 64+, and $5,250 for ages 60–63. Total combined employer and employee contributions are capped at approximately $34,000–$44,500 depending on age.
The strengths: Minimal administration, no Form 5500 required, no nondiscrimination testing, and a mandatory match that encourages employees to participate and save. The required employer contribution is also fully tax-deductible.
The limitations: The employee deferral limits are lower with a SIMPLE IRA than any other retirement plan. Employer contributions are mandatory every year — there's no skipping a year if business is slow. And a SIMPLE IRA cannot be maintained alongside any other qualified retirement plan.

401(k)

The 401(k) is the most widely recognized employer-sponsored retirement plan. It combines the highest employee deferral limits of any defined contribution plan with maximum employer flexibility, plan design customization, and the ability to serve businesses of virtually any size. In a 401(k), employees elect to defer a portion of their paycheck pre-tax (or to a Roth account after-tax), and the employer has the option, but not the obligation, to contribute a match or profit sharing contribution on top of that. The employer contribution formula is entirely up to the plan document.
 
The numbers: In 2026, employees can defer up to $24,500, with a catch-up of $8,000 for ages 50–59 and 64+, and $11,250 for ages 60–63 (the "super catch-up" introduced by SECURE 2.0). Total contributions from all sources — employee deferrals plus employer contributions, are capped at $72,000 per person (or $80,000/$83,250 with catch-up contributions). 
The key complexity: Traditional 401(k) plans are subject to nondiscrimination testing which compare how much highly compensated employees (including owners) defer relative to lower-paid employees. 
The strengths: Highest contribution limits of any defined contribution plan. Maximum flexibility in plan design. Allows both Roth and traditional contributions. Participant loans available. Vesting schedules available for employer contributions.
The complexity: Traditional 401(k) plans are subject to nondiscrimination testing which compare how much highly compensated employees (including owners) defer relative to lower-paid employees. More administrative overhead than a SEP or SIMPLE IRA. Requires a Third-Party Administrator (TPA), annual Form 5500 filing, and ongoing compliance monitoring. 
 

Safe Harbor 401(k)

The Safe Harbor 401(k) solves the testing problem entirely. In exchange for making a mandatory employer contribution (either a 3% non-elective contribution for all eligible employees, or a matching contribution up to 4% of compensation), the plan is exempt from ADP and ACP testing.

Defined Benefit Cash Balance Plan

The three plans above are all "defined contribution" plans, meaning the contributions are defined and the eventual retirement benefit depends on investment performance. A Defined Benefit (DB) plan works in reverse: the benefit at retirement is defined, and contributions are actuarially determined to fund that promised benefit. In a Defined Benefit plan, the employer bears the investment risk. If markets underperform, the employer must contribute more to make up the shortfall. In a 401(k) or SEP IRA, the employee bears that risk.
 
The numbers: For 2026, the maximum annual retirement benefit that can be funded through a Defined Benefit plan is $290,000 per year. The annual contribution required to fund that benefit is actuarially determined based on the participant's age, years until retirement, and investment return assumptions.
The strengths: Unparalleled tax deduction potential for high-income owners, especially those age 45–60. Predictable benefit for employees. Can be layered on top of a profit sharing/401(k) plan for maximum contribution.
The complexity: Requires an enrolled actuary every year to certify the contribution and the plan's funded status. The contribution is mandatory, not discretionary. Highest administrative cost of any plan type. Not suitable for businesses with significant numbers of younger employees.

Each plan offers a distinct trade-off between contribution limits, administrative complexity, and employer obligation — making the right choice entirely dependent on your business size, workforce, and income goals. See the comparison chart below for a side-by-side breakdown of each plan's 2026 contribution limits.

What Can You Still Set Up for the 2026 Tax Year?

With October here, several 2025 deadlines have already passed. It's too late to set up a SIMPLE IRA or any 401(k) for the 2025 tax year, but you still have until October 15th to establish a SEP IRA or Cash Balance Plan for 2025 if you haven't yet.

For 2026, every plan is still on the table. That said, two deadlines are coming up fast. A SIMPLE IRA and a Safe Harbor 401(k) both must be established by October 1, so if either is on your radar, now is the time to act. A traditional 401(k) must be established by December 31 to allow employee deferrals for the year, though employer contributions can be made as late as your tax return due date, including extensions. SEP IRAs, Solo 401(k)s, and Cash Balance plans are the most flexible. All three can generally be established and funded by your business tax return due date, including extensions, meaning you can wait until after the year ends to set them up. One exception to note: required contributions for a Cash Balance or Defined Benefit plan are generally due by September 15 following the plan year, so while setup is flexible, funding has its own earlier deadline.
 
All of these timelines hinge on your "business tax return due date," which depends on how your business is organized. Sole proprietors and C-corps have until April 15 (October 15 with an extension). S-corps and partnerships are on an earlier schedule — March 15 (September 15 with an extension). If you're unsure which applies to you, a quick check with your CPA will make sure you don't miss the window.

Closing Thought

Establishing a retirement plan is one of those decisions that is easy to postpone and difficult to regret. It rarely feels urgent, until a deadline passes or a high-income year goes by unsheltered. Yet the business owners who get this right are rarely those with the most elaborate strategy; they are simply the ones who acted while the opportunity was still available. If anything here raised a question or if you're unsure which plan fits your business, we'd be glad to help.
 
This newsletter is for educational purposes only and does not constitute tax, legal, or investment advice. Please consult a qualified tax advisor, ERISA attorney, and financial professional before implementing any retirement plan or strategy. Contribution limits and tax figures referenced are for the 2026 tax year.