If you’re a small-business owner, you think a lot about today. Is your cash flow sufficient … today? Are there loads available … today? And because you are so focused on today, you may be neglecting a key aspect of tomorrow – your retirement. Specifically, do you have a good retirement plan for yourself?

Given that your personal finances are so tied up with your business, your plans for the business will obviously greatly affect your financial situation when you retire. Whether you want to transfer the business to another family member, sell it outright to someone else, or possibly just wind it down, you’ll need to plan ahead and consult with your legal and tax advisors.

Small Business Owners Must Protect Their Futures

However, you can take steps now to help ensure you can enjoy a comfortable retirement. You have access to a variety of retirement plans appropriate for small-business owners, including these:

Owner-only 401(k) – This plan, also known as an individual or a “solo” 401(k), is available to self-employed individuals and business owners with no full-time employees other than themselves or a spouse. As the owner, you can contribute to your plan as both an employer and an employee; your total contribution limit for 2016 is $53,000, or $59,000 if you are 50 or older.

SEP IRA – If you have just a few employees or are self-employed with no employees, you might consider a SEP IRA. You’ll fund the plan with tax-deductible contributions, and you must cover all eligible employees. (Employees themselves cannot contribute.) You can contribute up to 25% of compensation, up to $53,000 annually. (Contributions for a self-employed individual are limited to 25% of compensation minus one-half of self-employment taxes.) And you can fund your SEP IRA with many different types of investments. Plus, you can establish a SEP IRA for 2016 until April 17, 2017.

Defined benefit plan – Pension plans, also known as defined benefit plans, have become less prevalent in recent years – but you can still set one up for yourself if you are self-employed or own your own business. This plan has high contribution limits, which are determined by an actuarial calculation, and as is the case with other retirement plans, your contributions are typically tax-deductible.

SIMPLE IRA – As its name suggests, a SIMPLE IRA is easy to set up and maintain, and can be a good plan if your business has fewer than 10 employees. Still, while a SIMPLE IRA may be advantageous for your employees, it’s less generous to you, as far as allowable contributions, than an owner-only 401(k), a SEP IRA or a defined benefit plan. For 2016, your annual contributions are generally limited to $12,500, or $15,500 if you’re 50 or older by the end of the year. You can also make a matching contribution of up to 3% of your compensation.

You need to establish a SIMPLE IRA between Jan. 1 and Oct. 1 of any year. In fact, if you’d like to set up any of the retirement plans we’ve looked at, don’t delay. The sooner you open your plan, the more years you will have to contribute – and, as you know, time is often an investor’s best friend.

This article was written by Edward Jones for use by Greg Hall, Financial Advisor with Edward Jones. He can be contacted via email at greg.hall@edwardjones.com or via phone at 303-985-0045.

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