It’s too hot to breathe! I don’t know about you, but my water bill is going to go up due to multiple showers. Who is controlling the thermostat in Savannah?
In the last issue, we concluded our multi-part series comparing the Traditional IRA vs the Roth IRA, each plan’s benefits and drawbacks, and the overall comparison. This week we are going to start an important multi-part series focusing on small business owners and their retirement plan options.
The Plans in This Series
- SEP IRA – a simple, employer-funded plan popular with self-employed people and very small businesses.
- SIMPLE IRA – a low-cost plan designed for businesses with up to 100 employees that want to offer a plan employees can also contribute to.
- Solo 401(k) – a high-contribution plan built for owner-only businesses with no full-time employees other than a spouse.
- Small Business 401(k) – a traditional or safe harbor 401(k) plan for businesses that have employees and want maximum flexibility and contribution power.
- Defined Benefit Plan – a pension-style plan that allows the largest possible tax-deferred contributions, generally suited to established, high-income businesses.
At-a-Glance Comparison
Contribution figures below reflect 2026 IRS limits. Limits are adjusted annually for inflation, so always confirm the current year numbers before making contributions.
| Plan | 2026 Contribution Ceiling (Employee + Employer) |
|---|---|
| SEP IRA | Up to $72,000 (employer-only, 25% of compensation) |
| SIMPLE IRA | $17,000 employee deferral ($18,100 for certain plans), plus employer match/contribution; $4,000 catch-up 50+/$5,250 for age60 to 63 |
| Solo 401(k) | Up to $72,000 total ($80,000 age 50–59/64+; $83,250 age 60–63) |
| Small Business 401(k) | $24,500 employee deferral, up to $72,000 total with employer contributions |
| Defined Benefit Plan | No fixed dollar cap — actuarially determined; can exceed $200,000+ annually for older, high-income owners |
A Simple Way to Narrow Your Choice
- Do you have employees besides yourself and a spouse?
If no, a Solo 401(k) or SEP IRA is likely your best starting point — both are built for owner-only businesses and carry minimal administrative burden. If yes, you’ll generally be choosing between a SIMPLE IRA, a small business 401(k), or a defined benefit plan, because those are designed to include a workforce fairly and compliantly.
- How much do you want to set aside each year?
If you’re aiming to save more than the SIMPLE IRA or basic SEP allows, and you’re past your business’s early, cash-constrained years, a 401(k) or defined benefit plan opens higher – or in the case of a defined benefit plan, substantially higher – contribution ceilings.
- How much complexity and cost can you take on?
SEP IRAs and SIMPLE IRAs are inexpensive and low maintenance, with little to no annual filing. 401(k) plans require plan documents, nondiscrimination testing (unless structured as safe harbor), and often a third-party administrator. Defined benefit plans require an actuary every year and the highest ongoing cost of any option – but they also allow the largest contributions.
(READING THIS SERIES: Each article that follows covers one plan in depth: how it works, exact 2026 contribution rules, a clear list of benefits and drawbacks, and the type of business it tends to fit best. Read the overview first, then jump to the plan (or plans) most relevant to your situation.)
If you have questions or would like to discuss any of this further, I would be glad to connect.
Don’t forget to join Live Like Locals and Stoners Pizza Joint in Pooler for $1.00 Pizza Slices Night on Thursday, August 27th from 6 – 8 pm!
Thought for the Week:
“Everyone wants to be happy now, but it might be better to optimize for being satisfied later. Momentary happiness is hard to predict, but deep satisfaction is easier to control. It is on the other side of good choices, good habits, and meaningful impact.”
(This article is intended for general educational purposes only and reflects tax rules for the 2026 tax year. Tax laws are subject to change. . Contribution limits, deduction rules, and eligibility requirements are set annually by the IRS and can change. This content does not constitute personalized investment, tax, accounting, financial, or legal advice. Please consult a qualified financial advisor, tax professional, ERISA attorney, or retirement plan provider before making retirement planning decisions for your business.)
Frederick Hogsett, Jr., is a licensed financial coach with almost 30 years of experience helping individuals, families, small businesses, and nonprofit organizations. His office is located in the Savannah, Georgia, area and can be reached at (803) 463-2773 or by website at www.livemore.net/fhogsettjrclient.