As a business owner, you shoulder many responsibilities — but have some perks as well. One benefit worth considering is setting up your own retirement plan that allows you to make larger contributions than you could as an employee.
For example, the maximum 2015 employee contribution to a 401(k) plan is $18,000 — $24,000 if you’re age 50 or older. Compare these limits to the amounts available to a business owner (that is, a “self-employed” individual) under:
- A profit-sharing plan, for which the 2015 contribution limit is $53,000 — $59,000 if you’re age 50 or older and the plan includes a 401(k) arrangement, or
- A defined benefit plan, for the maximum future annual benefit toward which 2015 contributions can be made is generally $210,000.
More good news: As long as you set up one of these plans by, you can make deductible 2015 contributions to it until the 2016 due date of your 2015 tax return.
Additional rules and limits do apply. For instance, your employees generally must be allowed to participate in the plan, provided they meet the requirements for doing so.