How to Set Up a Retirement Plan for Small Business Owners in 2024

If you’re running a business with an annual revenue of seven figures or more, you’ve worked long and hard to get where you are now. There’s more work to do. You earned it. Can you keep it? Have you thought about your exit strategy? Do you know how to set up a retirement plan for small business owners like yourself?

What is a retirement plan? Well, it’s deciding what to do now to make sure that you take your wealth all the way to the grave. We don’t want to be clipping coupons at 76 years old, but it’s a possibility even with the business-friendly tax code in this country. The good news is that with time, effort, and expertise, you can achieve remarkable outcomes.

This is the first article I’ve written on this aspect of tax planning. We’re here to get a sense of retirement planning, not to examine the specifics. We’ll start with context and concepts. Stay with me because tax planning for retirement transcends business. It’s about life and family.

The first step? Have a plan.

So, you want to protect your income and manage your wealth in a tax-efficient manner? What’s the plan? Five years from now? Ten years? Thirty? The strategies we create now will directly impact the livelihood of our children and their children.

Retirement is part of the tax planning process, and I think that value is lost on many business owners who, often because of sticker shock, choose to go without high-level tax planning.

I get it. You need money now. At the same time, I’d wager that you solve short-term problems and engage in long-term planning every day. You’re up to the task.

“How does a retirement plan affect a tax return?” clients often ask. Good question, but let’s be aspirational first: How do we grow retirement accounts and put your money in assets, like real estate, that appreciate in value and not in tax liability?

Let’s call it a tax-withdrawal strategy: Get out without getting shaken down for cash.

Every function of your business is part of your tax plan.

If that’s true, we need to be proactive. Look at your business in the present and future; examine your business from all angles. What’s making you money? Is that activity tax-efficient? How can we get to profitability and tax efficiency?

So, if you had to sell off your business assets right now, what would the tax bill look like? Capital gains, real estate, machinery, trucks, appliances—who should own these assets? You or your business?

Entity structure matters. It is a headache, I know. And I’m not a tax lawyer, so I can’t change the structure. Only lawyers are legally able to write contracts. But I’ve put more money back in client’s pockets by changing how their business is taxed. We can do that without altering the legal entity structure.

When we talk about how to set up a retirement plan for small business owners, we’re talking about transforming everything you do in life and business to be conducive to tax efficiency. It’s a marathon, not a sprint.

Maximize your retirement savings with these seven core strategies.

  1. Tax deductions lower your taxable income. The more you claim, the more you save.
  2. Restructuring the legal entity can mean savings in state and local taxes.
  3. Retirement planning, including traditional IRAs and Roth accounts, can set you up for tax-free or tax-deferred growth.
  4. Insurance policies may offer tax advantages and can be a part of your retirement planning.
  5. Tax-deferred accounts keep more operating capital in your account.
  6. Tax-sheltered assets, such as municipal bonds and certain real estate investments, can provide income niche-specific tax treatment and savings.
  7. Updates and exceptions to the tax code provide new opportunities to save.

Here’s what happens if you get into tax planning and take it seriously.

So, this man is a client of mine. We’ll call him John. At 32, John owned a thriving business and, at the time, faced an equally impressive collection of tax liabilities. The solution? Restructure how his business was taxed and focus on tax-deferred accounts like 401(k)s and Roth IRAs. We saved him $28,910 annually.

No change in lifestyle. No change in operations. Just 30K more a year toward kids and college.

Retirement planning is different for everyone. Stay agile.

Successful retirement plans deal with federal and state income taxes, the potential growth of retirement funds, and strategies for timely and tax-efficient withdrawals. Retirement is part of tax planning, which is not exactly simple. But dealing with complexity is my job, and the financial well-being of my clients is my responsibility.

It’s never too early or too late to plan for a financially secure retirement. A good time to get started would be right now. Get in touch.

Talk soon,
Jeremy A. Johnson, CPA

Meet the Author
Jeremy A. Johnson, CPA, is an expert in strategic tax planning, accounting, CFO services, and thought leadership.

Jeremy writes for small business owners who need actionable information on tax strategy, efficient accounting practices, and plans for long-term growth.

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