If you are a small business owner, choosing the right retirement plan is a key step in supporting both your business and your employees.
Two of the simplest and most cost-effective options are SEP IRAs and SIMPLE IRAs. While both offer tax advantages and reduced administrative burden, they are designed for different types of businesses. Here’s a streamlined overview with the latest 2025–2026 contribution limits.
SEP IRA: Flexible and Owner-Focused
A SEP IRA is ideal for business owners with no or few employees who want improved contribution potential.
Advantages:
High contribution limits
- 2025: Up to 25% of eligible compensation, capped at $70,000.
- 2026: Up to 25% of eligible compensation, capped at $72,000.
Employer-only contributions — Only the business contributes; employees cannot defer salary.
Flexible funding — You choose each year how much to contribute, or whether to contribute at all. Note, if you contribute 10% of your income as the owner to your SEP, you must contribute to each of your employees’ SEP IRAs as well at a rate of 10% of their salaries.
Easy administration — No annual Form 5500, minimal paperwork.
Best for: Sole proprietors and high-income owners wanting flexible, high-limit contributions.
SIMPLE IRA: Structured and Employee-Friendly
A SIMPLE IRA offers a straightforward way for employees to save through salary deferrals while keeping costs low for employers.
Advantages:
Employee salary deferrals allowed
• 2025: Up to $16,500 (under age 50).
• 2026: Up to$17,000 (under age 50).
• Catch-up for 50+: Typically $3,500–$4,000, depending on year and IRS updates.
Mandatory employer contribution — Either a match up to 3% or a 2% nonelective contribution.
Simple oversight — Light administrative requirements without the complexity of a 401(k).
Helps attract and retain employees — Provides a tangible, easy-to-use benefit.
Best for: Small businesses with employees who want to participate in retirement savings.
Which Plan Is Right for You?
If your goal is improved flexibility and higher owner contributions, a SEP IRA may be the better fit, particularly if you have few or no employees outside of owners. If you prefer employee participation through payroll deferrals and predictable employer contributions, a SIMPLE IRA may be the smarter choice.
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Questions? We’re Here to Help.
If you’d like help deciding between these options, guidance in setting one up, or a no-cost, no-obligation review of your current retirement plan, contact Voyage Financial Group. Our team is ready to support you and your business every step of the way.
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