Retirement Savings Options for S-Corp Owners: A Friendly Guide
- Evin Wick
- Apr 1
- 3 min read
Updated: 5 days ago
As an independent professional running your own S-Corp, planning for retirement can seem complex—but it doesn't have to be! Choosing the right retirement plan helps you maximize your savings, minimize your taxes, and simplify your financial life. Let's break down five popular retirement savings options clearly, so you can easily decide which is best for your situation.
1. Traditional IRA and Roth IRA
Ideal For: Those just getting started who want simplicity and flexibility.
How It Works: Contributions are made directly from your personal funds, typically once a year when filing taxes.
Contribution Limits (2024): $7,000 if under 50; $8,000 if age 50+
Deadline: Contributions due by the tax filing date - typically April 15. Tax extensions do not extend the limits.
Benefits: Simple, low administrative effort, tax-deductible (Traditional IRA) or tax-free withdrawals (Roth IRA). Many already have these plans setup.
Drawbacks: Lower contribution limits compared to other plans; income limits restrict Roth IRA contributions.
2. SEP IRA (Simplified Employee Pension)
Ideal For: Single-employee S-Corps, including those with spouse employees, particularly with moderate income.
How It Works: Employer (your S-Corp) makes direct contributions to the employee’s SEP IRA account.
Contribution Limits (2024): Up to 25% of your W-2 compensation or $69,000, whichever is less.
Deadline: Contributions can be made up to tax filing deadline including extensions (eg Sept. 15, 2025, if extended).
Benefits: Simple to set up, flexible contributions, minimal paperwork.
Drawbacks: Must contribute equal percentages for all eligible employees, which can become costly if you have multiple employees.
3. Solo 401(k)
Ideal For: S-Corp owners without employees (or with only a spouse employee), especially those with higher incomes who want maximum contributions.
How It Works: Employee contributions are made from paycheck deductions. Employer contributions can be made with each paycheck or additional contributions at year-end.
Contribution Limits (2024): Up to $23,000 employee deferral ($30,500 if 50+), plus up to 25% employer profit-sharing, with a combined total maximum of $69,000 ($76,500 if age 50+).
Deadline: Employee contributions by December 31, 2024; employer contributions up to tax filing deadline (with extensions).
Benefits: High contribution limits, Roth option available, loans permitted.
Drawbacks: Requires some administrative setup; annual IRS reporting required once assets exceed $250,000.
4. Safe Harbor 401(k)
Ideal For: S-Corps with employees, aiming to maximize owner contributions while maintaining fairness and compliance.
How It Works: Employee contributions come from paycheck deductions, while employer contributions (matching or profit-sharing) can be made each paycheck or at year-end.
Contribution Limits (2024): Employee deferral up to $23,000 ($30,500 if age 50+), total limit up to $69,000 ($76,500 for age 50+) including employer matching/profit-sharing.
Deadline: Plan setup required by October 1, 2024; employee deferrals by December 31, 2024; employer contributions by tax filing deadline (with extensions).
Benefits: Automatically meets IRS nondiscrimination tests, maximizing owner benefits.
Drawbacks: Higher administrative costs and complexity.
5. SIMPLE IRA
Ideal For: Small businesses with employees seeking simplicity with moderate contributions.
How It Works: Employees contribute through paycheck deductions; employer must match employee contributions (2–3% match).
Contribution Limits (2024): Employee deferral up to $16,000 ($19,500 if age 50+ catch-up).
Deadline: Setup required by October 1, 2024; contributions due by the tax filing deadline.
Benefits: Easy setup, low administration, mandatory employer match of 2–3%.
Drawbacks: Lower contribution limits compared to 401(k)s or SEP IRAs.
Comparison Table for retirement for S Corp (2025)
Plan Type | Max Contribution | Best For | Deadline |
Traditional/Roth IRA | $7,000–8,000 | Simplicity, starters | Tax filing deadline |
SEP IRA | $69,000 or 25% W-2 | Single-employee or spouse | Tax filing (with extension) |
Solo 401(k) | $69,000 ($76,500 age 50+) | High-income, no employees | Employee: 12/31, Employer: Tax filing deadline |
Safe Harbor 401(k) | $69,000 ($76,500 age 50+) | S-Corps with employees desiring flexibilty | Plan: Oct 1, Deferral: 12/31, Match: Tax filing deadline |
SIMPLE IRA | $16,000 ($19,500 age 50+) | Moderate income, simplicity w/ employees | Setup by Oct 1, contributions by tax filing |
Recommendations
Moderate income, only owner or owner and family: Go with a SEP IRA—easy to manage and generous contribution limits.
Higher income, no employees or spouse only: Choose a Solo 401(k) for maximum savings and flexibility.
Have employees and want significant owner contributions: Implement a Safe Harbor 401(k)—optimal balance of owner benefits and employee fairness.
By understanding these retirement options clearly, you can confidently choose the right plan to secure your financial future.
Evin Wick JD, LLM is a Georgetown-trained tax lawyer and co-founder of Scorpu, where he channels two decades of small-business tax expertise into streamlined S-Corp, bookkeeping, and payroll solutions for solo consultants.
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