5 Best Retirement Plans For Sole Proprietorship

Sole Proprietorships are very easy to set up, and the 5 best retirement plans for sole proprietorship reflect this, too. Many small businesses are in fact sole proprietorships that are run that way for decades. These retirement plans will make it easy for your sole proprietorship to retain and attract good employees.

  1. SEP IRA. SEP IRAs are good for sole proprietorships because it is an easy to administer plan that runs at a low cost. No annual funding is required; nor is their IRS reporting required. Employers fund the whole plan, so employees do not have to worry about anything, and withdrawals are permitted before age 59.5, but may be subject to a small fee.
  2. Individual 401(k). These retirement plans feature less administration requirements than traditional 401(k)s. A true benefit with this plan for sole proprietorships is the loan withdrawal criteria. Loans are permitted tax free, provided that only 50 percent of the total 401(k) value is borrowed, up to a maximum of $50,000.
  3. Simple IRA. The Simple IRA is a plan that relies on almost all employee contributions, but employers are still permitted to contribute to the plan, albeit in limited fashion. Employers have to match everything an employee puts into their plan through their contributions.
  4. Defined Benefit Plans. The lure to these plans is that they allow the maximum tax deductible retirement plan contribution, and employees must not worry about contributing, since it is the employer's duty. However, small note of caution: Hardship withdrawals are not allowed under any circumstances.
  5. Keogh Plans. Great for small businesses as well as the self-employed, Keogh plans come in two versions, defined benefit and defined contribution. With the former, a fixed contribution is made each pay period. With the latter, an IRS formula is used to calculate the contributions, and there is the option of setting it up as a profit-sharing plan.
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