Retirement Planning for Solopreneurs

When your day involves jumping from client emergencies to bookkeeping to marketing — all before lunch — retirement planning rarely makes it to the top of your to-do list. It’s easy to put off when cash flow is tight, deadlines are looming, or business expansion opportunities demand your attention.

Unlike corporate employees with company-sponsored retirement plans, your future financial security falls squarely on your shoulders. This autonomy is a blessing and a challenge: As a business owner, you have complete freedom to create your ideal future but also total responsibility for designing and funding it.

The Reality of Retirement Planning for Solopreneurs

According to a recent survey by the Transamerica Center for Retirement Studies, one in five self-employed workers aren’t saving for retirement. Those who do save aren’t doing so consistently, with about 34% saving only “from time to time.”

Additionally, data from the 2023 Business Owner Readiness Survey shows that 50% of business owners don’t know what they’ll do after exiting their business, revealing a significant gap in financial and lifestyle planning for their future.

Many solopreneurs put off retirement planning or feel unsure about where to start. But delaying only makes that eventual transition more challenging. We typically recommend beginning serious retirement planning at least five years before retirement. Let’s look at some of the available options for retirement planning for business owners.

Retirement Savings Options for Solopreneurs

As a solopreneur, you have access to several retirement plan options offering tax advantages and higher contribution limits than those available to traditional employees. Each has distinct benefits depending on your income level, age, growth plans, and tax situation.

Solo 401(k)

What is it? A Solo 401(k) is designed specifically for business owners with no full-time employees (other than a spouse). It works similarly to traditional 401(k) plans but allows you to contribute as both employer and employee.

Contribution limits for 2025: You can contribute up to $23,500 as an employee (with an additional $7,500 catch-up contribution if you’re over 50), plus employer contributions of up to 25% of your compensation — for a total maximum annual contribution of $70,000 ($77,500 if you’re age 50 or older). 

Best for: Solopreneurs with high incomes looking to maximize retirement savings.

SEP IRA (Simplified Employee Pension IRA)

What is it? A SEP IRA is easier to set up and maintain than a Solo 401(k) but still offers generous contribution limits. Contributions are also tax-deductible.

Contribution limits for 2025: You can contribute up to 25% of your net self-employment income, up to a maximum of $70,000.

Best for: Self-employed individuals who want simplicity and flexibility in contributions, as you can vary contributions based on business performance.

SIMPLE IRA (Savings Incentive Match Plan for Employees)

What is it? A SIMPLE IRA is designed for small business owners with up to 100 employees.

Contribution limits for 2025: You can contribute up to $16,500 (with an additional $3,500 catch-up contribution if you’re age 50 or older).

Best for: Solopreneurs who anticipate scaling their business and hiring employees in the near future, or those who already have a few employees but still consider themselves primarily solopreneurs. It offers simplicity while accommodating potential business growth.

Traditional IRA

What is it? A Traditional IRA allows you to contribute pre-tax dollars, potentially reducing your taxable income for the year you contribute. Earnings grow tax-deferred but both contributions and earnings are taxed as ordinary income when withdrawn in retirement.

Contribution limits for 2025: $7,000 (with an additional $1,000 catch-up contribution if you’re age 50 or older).

Best for: Solopreneurs who expect to be in a lower tax bracket in retirement, or those who want an immediate tax deduction.

Roth IRA

What is it? With a Roth IRA, you contribute after-tax dollars but your money grows tax-free. Qualified withdrawals in retirement are also tax-free.

Contribution limits for 2025: $7,000 (with an additional $1,000 catch-up contribution if you’re age 50 or older).

Best for: Younger solopreneurs with longer timelines to retirement, those who expect to be in a higher tax bracket during retirement, or those who want tax-free withdrawals without required minimum distributions.

Beyond Retirement Accounts: What Else Should You Be Thinking About?

Retirement planning for business owners extends beyond opening a retirement account. Solopreneurs need a well-rounded strategy that addresses the following five issues:

Healthcare Costs

Healthcare can be one of your largest expenses in retirement, particularly in high-cost areas like San Diego. A 2023 Fidelity study estimated an average 65-year-old couple in America can expect to pay around $315,000 for healthcare throughout their retirement.

When planning for healthcare in retirement, key things to consider include understanding how Medicare works; budgeting for supplemental or private insurance if needed; and preparing for long-term care costs, which aren’t generally covered by Medicare.

Business Valuation and Exit Strategy

Many solopreneurs have a significant portion of their net worth tied up in their business. Do you know how much your business is worth? According to the 2023 Business Owner Readiness Survey, 50% of business owners don’t regularly measure or formally track their business value.

Whether you plan to sell your business, pass it to family members, or close up shop, your exit strategy will significantly impact your retirement income. Starting exit planning at least five years before your planned departure gives you time to increase your business’s value and implement tax-efficient transfer strategies.

Planning for Life After Work

Have you thought about how you’ll spend your retirement? Many business owners struggle with the transition from full-time entrepreneurship to retirement because their identities are closely tied to their businesses.

Consider:

• What will give you purpose when you’re no longer running your business?
• How will you think about yourself when you’re no longer a business owner?
• What activities, hobbies, or second careers interest you?
• Who will you spend your time with?

It may be worth taking a “retirement test drive.” This might look like scheduling a few weeks off to simulate a mini-retirement and gauge how ready you are for this life transition.

Estate Planning

Estate planning for business owners is particularly complex. Beyond obvious considerations like wills and powers of attorney, you need to think about business succession planning (transferring ownership and control of your business), potential estate taxes, and making sure your business assets are distributed according to your wishes.

Tax Optimization

Taxes in retirement can be a minefield for solopreneurs. Without careful planning, you may owe a sizable portion of your savings to the IRS. Working with a professional to develop strategies to minimize taxes now and in the future can significantly increase your retirement income.

Taking the Next Step

Retirement and financial planning for business owners is an ongoing process that evolves with your business and personal circumstances. The key is to start early, be consistent, and regularly review your progress toward your goals.

By taking control of your retirement planning today, you’re making an investment your future self will thank you for — one that will enable you to eventually step away from your business with confidence and financial security.

How We Can Help You Plan for Retirement

While DIY retirement planning is possible, solopreneurs face unique challenges that often benefit from professional guidance. At CCMI, we understand those challenges because we’ve been serving business owners for years. As business owners ourselves, we bring firsthand experience to the table alongside our professional expertise. Our team can guide you through creating a retirement strategy that reflects your personal and business financial goals.

Contact us today to schedule a consultation and take the first step toward planning for a retirement you can look forward to.