A lot of trades business owners I talk to have spent years pouring every spare dollar back into the business: new equipment, hiring, growth. Which makes sense. But it also means retirement planning quietly gets pushed to "someday," & someday has a habit of arriving faster than expected.
If you're self-employed & don't have a retirement account set up yet, here are the two most common options worth understanding: the SEP IRA & the Solo 401(k).
SEP IRA: Simple & Flexible
A SEP IRA (Simplified Employee Pension) is one of the easiest retirement accounts to set up & maintain. Contributions come from the business, not your personal paycheck, & the contribution limits are generally tied to a percentage of your compensation, allowing for significant tax-deferred savings in good years.
The appeal is simplicity: minimal paperwork, low maintenance, & flexibility to contribute more in strong years & less in lean ones.
Solo 401(k): More Room to Save
A Solo 401(k) is designed for business owners with no employees, other than a spouse. It typically allows for both an "employee" contribution & an "employer" contribution, which combined can let you save significantly more than a SEP IRA in many situations, especially at lower income levels.
Some Solo 401(k) plans also allow for a Roth option, letting you choose between tax-deferred & tax-free growth, & some allow loans against the account balance, which a SEP IRA does not.
Which One Actually Fits Your Business?
The right choice depends on a few things: how much you want to contribute, whether you have employees, how your income fluctuates year to year, & whether the slightly higher administrative requirements of a Solo 401(k) are worth the extra savings capacity.
For an owner with no employees & a strong, consistent income, a Solo 401(k) often allows for meaningfully higher contributions. For an owner who wants something simpler to manage, or who has a few employees & wants to limit contribution obligations, a SEP IRA might be the better fit. Note: SEP IRAs generally require proportional contributions for eligible employees too, which is worth understanding if you have a small crew.
The Real Mistake: Waiting
The accounts matter, but the timing matters more. Every year you wait to start is a year of tax-deferred growth you don't get back. Starting smaller, sooner, almost always outperforms starting bigger, later.
Using Your Business to Build Your Own Future
Here's the thing I want every trades business owner to internalize: your business is not automatically your retirement plan. It's an asset, sometimes a significant one, but assets can be unpredictable. A retirement account, funded consistently, is something you control directly, separate from how the business performs in any given year.
Let's Figure Out What Fits
If you've been putting this off because it felt complicated, it's genuinely not as complicated as it feels, especially with the right person walking you through it.
At Authentic Wealth Partners, we help trades business owners figure out exactly which retirement structure fits their specific business, then help them actually fund it. Reach out, & let's get this off the "someday" list.