Key takeaways
- Three small-business plans express three philosophies: simplicity, employee inclusion, or maximum capacity.
- Four questions about the business decide which one fits, and the answer usually falls out rather than being chosen.
- All three can hold alternative assets, so the plan choice is about contributions and administration, not the menu.
Small-business retirement plans get chosen by inertia — whatever the accountant mentioned first — when four questions decide the fit better: Who works here? How much do you want to shelter? Whose money funds it? How much administration will you tolerate?
The three, characterized
A SEP IRA is employer-money-only and radically simple: contributions are a percentage of compensation, set year by year — generous in good years, zero in lean ones. Its catch is fairness by design: cover yourself and you generally cover eligible employees at the same percentage. A SIMPLE IRA is built for teams: employees defer their own pay and the employer commits to a modest match or contribution — lighter than a 401(k), friendlier than funding everyone’s SEP, with lower deferral ceilings as the trade. The Solo 401(k) is the capacity king for owner-only businesses: employee deferral plus employer profit-sharing stack toward the highest totals, with Roth deferrals and loan features available — and it ends the day you hire a non-spouse employee.
The decision in practice
Owner-only and maximizing: Solo 401(k), almost regardless of the other answers — especially if leveraged real estate is in the plan (the UDFI angle). Employees on payroll and you want them included affordably: SIMPLE. Variable income, no employees or few, and allergic to paperwork: SEP — you can even decide after year-end. Expecting to hire soon: weigh the Solo 401(k)’s expiration date now rather than converting under deadline later.
Self-directed, whichever you choose
All three can be self-directed at a custodian that supports alternative assets — the account chassis differs; the rules of the road don’t. Contribution limits and eligibility details shift with tax years, so confirm current figures before committing — and when the choice is genuinely close, an hour with a plan professional is cheaper than a year in the wrong chassis. We can help you scope it.
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.