If you are not self-employed and participate in your employer’s retirement plan, click here to review how to help maximize your employer-sponsored retirement plan to celebrate 401(k) Day.
Key Takeaways:
- Retirement plan choices for self‑employed individuals include Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE) IRA, and Solo 401(k) plans.
- SEP plans allow employer contributions only and have flexible annual contribution amounts.
- SIMPLE IRAs combine employee salary deferrals with required employer contributions.
- Solo 401(k) plans permit both employee deferrals and employer contributions when there are no full‑time employees other than the owner and spouse.
- Employer‑sponsored plans such as traditional 401(k), Roth 401(k), 403(b), and profit‑sharing plans provide various contribution structures and features.
- Contribution limits and catch‑up provisions differ across plan types and may affect annual savings capacity.
- Plan design may include options for loans, investment choices, and vesting schedules depending on the plan document.
- Rollovers between qualified retirement plans are subject to rules that influence how assets can be moved when changing employment or plan types.
Popular small business retirement plans include SEP IRAs, SIMPLE IRAs, Solo 401(k)s, traditional 401(k)s, and defined benefit plans. The optimal plan will depend on a number of factors, including: the amount and stability of extra cash flow that can be used to contribute to and maintain the plan (both now and in the future), your age, the average age of your employees, employee turnover, and your generosity towards employees (certain plans require you to contribute on behalf of your employees, while others do not.)
In 2026, the maximum annual contribution limit for SEP IRAs, Solo 401(k)s, and traditional 401(k)s is $72,000 before catch-up contributions. This limit may be reduced based on income and includes contributions made by the employer and the employee, where applicable. Defined benefit plan contributions might be much higher. Unlike SEP IRAs and 401(k)s, defined benefit plans do not have a fixed contribution limit. Instead, they have a maximum annual benefit amount. Contributions can be made up to an amount that is expected to provide the maximum allowable annual benefit of $290,000 in retirement (2026). Professional actuaries determine required annual funding amounts for defined benefit plans.
Establishing certain retirement plans may be as simple as filling out an adoption agreement and completing an application through your brokerage firm. Although it’s easy, you might find that your brokerage company is not fully equipped to help with plan-related questions or requests that could arise. Instead, we recommend hiring a third-party administrator (TPA) to help with choosing a plan, drafting the plan document, preparing necessary tax filings, and managing plan requests, such as loans, rollovers, and distributions.
Key Planning Considerations
If your income was higher than in previous years, and you are looking for a last-minute tax savings idea, consider establishing a SEP IRA, as you have until the tax filing deadline, including extensions, to contribute and still take the deduction for the year before. If you have a 401(k) plan, it may be a good idea to review provisions created by the SECURE Act 2.0, including emergency savings accounts, Roth employer contributions, and expanded catch-up options. Beginning in 2026, catch-up contributions generally must be made as Roth contributions for participants whose prior-year FICA wages from the plan sponsor exceeded $150,000.
How can your Beacon Pointe advisor help?
No matter your role — whether you own a business, help guide your company’s retirement plan, or simply want to make smarter use of your workplace savings — your Beacon Pointe advisor can help you make the most of your retirement benefits. We understand that every client’s situation is unique, and we bring the tools, experience, and personal attention needed to align your retirement plan decisions with your broader financial goals.
Here’s how Beacon Pointe can support you:
- Plan Selection and Strategy Alignment: We help you select the right retirement plan and contribution strategy based on your cash flow, tax planning, and long-term financial plan. For employer-sponsored plans, Beacon Pointe can also serve as a 3(21) investment fiduciary or 3(38) investment manager, depending on the level of discretion the plan sponsor wants to delegate. Many other firms do not permit their financial advisors to serve in these roles, allowing us to provide a more customized investment menu and fiduciary experience.
- Administrative Relief and Plan Optimization: We can reduce your workload by streamlining plan oversight, coordinating with providers, and identifying cost-saving opportunities. Through our partners at RPAG, plan sponsors also receive access to Fiduciary Briefcase, a cloud-based compliance and governance system, and may be able to use institutional Collective Investment Trusts (CITs) that can reduce participant investment costs by approximately 20% to 45%, depending on the plan and investment lineup.
- One-on-One Investment Guidance and Education: We offer personalized advice and education for you and your employees to make confident, goal-aligned decisions. Our TIFIN @Work financial wellness offering can also reduce your HR team’s workload and provide personalized financial guidance to employees at no additional cost to the employer.
We can help you choose the right type of retirement plan, reduce administrative burden, and identify ways to improve cost efficiency, investment options, and overall plan performance.
Ready to explore your retirement plan options or just want to make the most of what you already have? Reach out to your Beacon Pointe advisor to start the conversation. We’re here to help you take the next step with clarity and confidence.
Choosing the Right Retirement Plan for Your Business | |||||
| SEP IRA | SIMPLE IRA | Solo 401(k) | Profit Sharing with Traditional 401(k) | Defined Benefit | |
| Contribution Options | Employer-only contributions are optional; maximum is the lesser of 25% of compensation (20% of adjusted net earnings for a sole proprietor) or $72,000 (2026). | Employee deferral: $17,000; certain plans permit $18,100. The employer generally matches up to 3% of compensation or contributes 2%. Catch-up: $4,000 at age 50 or older; $5,250 at ages 60-63 (2026). | Employee deferrals up to $24,500 plus employer contributions of up to 25% of compensation, or generally 20% of adjusted net self-employment earnings. Combined contributions cannot exceed $72,000 before catch-up contributions. Catch-up: $8,000 at age 50 or older; $11,250 at ages 60-63 (2026). | Flexible employer profit-sharing contributions plus optional employee deferrals up to $24,500; combined limit is $72,000 before catch-up contributions. Catch-up: $8,000 at age 50 or older; $11,250 at ages 60-63 (2026). | Employer-paid contributions are generally required annually as set by plan terms and determined by an actuary; maximum annual benefit is $290,000 (2026). |
| Who is Covered | Generally includes employees who are at least age 21, worked in 3 of the last 5 years, and received at least $800 in compensation for 2026. A plan may be less restrictive. | Must be offered to all employees who received at least $5,000 compensation in any prior 2 years, and reasonably expected to earn $5,000 in current year | Owner and spouse (Only) | Generally offered to employees age 21 after completing either 1,000 hours during a 12-month eligibility period or, for elective deferrals, at least 500 hours in each of two consecutive 12-month periods. | Must be offered to employees at least age 21 and worked at least 1,000 hours in previous year |
| Vesting Schedule | 100% immediately vested | 100% immediately vested | 100% immediately vested | Employee deferrals are always 100% vested. Employer contributions may use up to a 3-year cliff or 2-6 year graded schedule, depending on plan design. | Vesting schedule can be either 5-year cliff or 3-7 year graded (if not top heavy) |
| Other Factors | Easy to set up and maintain; low administration costs. A good fit for self-employed individuals, but the same contribution percentage generally must be offered to each eligible employee. Establish and fund by the employer’s tax-filing deadline, including extensions. | Easy to maintain; low administration costs. Available to eligible employers with 100 or fewer employees. Generally establish by Oct. 1. Employer contributions are due by the tax-filing deadline, including extensions. Employee deferrals must be deposited promptly; most small plans have a 7-business-day safe harbor. | Low to medium administration cost. Best for business owners with no employees other than a spouse and higher free cash flow. Generally establish by year-end. However, a sole proprietor with no employees may adopt a new plan for the first year by the original tax-filing deadline, without extensions. Contribution deadlines vary by contribution type. | Low to high administration cost depending on design complexity and other factors, provide high level of total pre-tax savings for owners. Best fit for business owners looking to maximize contributions, without mandating contributions. | High complexity and administration cost; employer must contribute any amount needed to satisfy minimum funding requirement. Best fit for employers who desire to contribute more than amounts allowed by other plans and have stable cash flow. Minimum funding requirements for a plan year generally made in quarterly installments and no later than 8 ½ months after the end of that year. |
Important Disclosure: This material is intended for general informational purposes only and does not constitute a recommendation or offer to adopt any specific retirement plan or strategy. Beacon Pointe Advisors does not offer legal or tax advice. Please consult with the appropriate tax or legal professional regarding your circumstances. This information is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Only a tax or legal professional may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement any design discussed herein. Nothing herein should be relied upon as personalized investment advice, nor should it be considered an individualized recommendation, offer or solicitation for the purchase or sale of any security or to adopt a specific investment strategy. An investor should consult with their financial professional before making any investment decisions. Beacon Pointe provides links for your convenience to other providers’ websites. Beacon Pointe is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve or endorse the information provided.