How to retire as a small-business owner: A step-by-step guide

For most owners, their small business is their most significant financial asset, with some even counting on it as a retirement plan. In fact, 1 in 5 business owners have no retirement savings whatsoever and will rely entirely on their business to meet their retirement needs.

If you've dedicated years of your life, energy, and capital to building your business, It’s time to create a strategy to ensure success translates into a comfortable and secure retirement.

Whether you envision a clean sale for a lump sum, a smooth transfer to a family member or partner, or a gradual transition into passive ownership, it’s time to develop a strategy.

Jump to:

1. Set life and retirement goals
2. Choose a retirement plan
3. Plan an exit strategy
4. Determine the future value of your business
5. Examine your other assets and investments
6. Prepare your will
7. Avoid touching your retirement savings too early

• What happens after i retire as a small business owner?
• The challenges of retiring as a small business owner
• Run your business with confidence

Follow this guide to help ensure you don’t reach retirement age without a plan for your and your small business.

1. Set life and retirement goals

As a small-business owner, you’re no stranger to setting and achieving goals. Retirement is no different. Before you can retire, you must set a goal that aligns with your financial situation and the life you desire after retirement.

Do you plan to spend your golden years close to home? Or would you rather spend them traveling the world? Your retirement goals and timeline may differ depending on your desired retirement lifestyle.

To help get a clear idea of your retirement goals, ask yourself the following questions:

• What are your predicted sources of income during retirement?
• Where do you plan to spend your retirement years?
• What will your monthly expenses be once you retire?
• Have you considered the increased cost of living as you age?
• Have you considered the added expenses that may come with health issues?
• What age do you want to retire?
• How much do you need to have saved to meet this goal?

Once you have a clear retirement goal, you can start taking the steps necessary to meet it.

2. Choose a retirement plan

Unlike traditional employees, self-employed individuals have different options for retirement. From a SEP-IRA to a self-employed 401(k) plan, you’ll have to choose whatever small-business owner retirement plans match your business and retirement goals the best.

To help you make your decision, we’ve gathered some popular retirement plans for small-business owners:

Continue reading to learn more about each of these small-business retirement plan options.

SEP-IRA

A SEP-IRA is an employer-sponsored retirement arrangement eligible for the self-employed and business owners with more than one employee. As a small-business owner, you can make tax-deductible contributions on behalf of your employees.

In addition, small-business owners are also considered employees, so you’ll be able to contribute to your retirement account as well.

Because of this, a SEP-IRA is a cost-effective way to help both you and your employees with retirement. SEP-IRAs offer a range of investment options, including mutual funds, stocks, and bonds. As of 2025, SEP-IRA contribution limits are the lesser of either 25% of the employee’s compensation or $70,000.

SIMPLE IRA

A SIMPLE IRA is for small-business owners with less than 100 employees. Similar to a SEP-IRA, a SIMPLE IRA allows you to contribute to your and your employees' retirement. On the other hand, a SIMPLE IRA allows employees to contribute to their retirement, whereas only employers can contribute to a SEP-IRA.

As a small-business owner, you’re generally required to make a dollar-for-dollar contribution match up to 3% of employee compensation or a non-elective contribution equal to 2% of their annual salary. 

As of 2025, SIMPLE IRA contribution limits are $16,500. If you’re over the age of 50, you’re eligible for a total contribution of $20,000, thanks to a $3,500 catch-up contribution.

Self-employed 401(k)

Another retirement plan option for small-business owners is a self-employed 401(k), also known as a solo 401(k). Unlike a SEP- or SIMPLE IRA, a solo 401(k) is a type of 401(k) available to small-business owners without any employees (aside from a spouse).

With a solo 401(K), you’re essentially acting as both the employer and employee, allowing you to contribute in both capacities. Like an IRA, a 401(k) plan includes a range of investments, such as mutual funds, stocks, and bonds.

As of 2025, you're limited to contributions of $23,500 as an employee elective deferral. If you are over the age of 50, you can make an additional catch-up contribution of $7,500.

For the employer portion, you can contribute up to 25% of your compensation, with the total 401(k) contribution limit (employee plus employer) being the lesser of either 25% of your adjusted gross income or $70,000.

3. Plan an exit strategy

As you prepare for retirement, you’ll also want to determine an exit strategy from your business. Whether you’re planning to sell your business or find people to help take over, it's important to create and follow an exit plan that best aligns with your retirement timeline and goals.

After all, the small business you’ve built over the years may be your largest asset and could be instrumental in funding your post-retirement life. Because market conditions can affect your ability to sell your small business, it's important to build flexibility into your exit strategy in case of a recession or poor market conditions.

4. Determine the future value of your business

Many small-business owners often make the mistake of overestimating the value of their business. If you plan on using your small business to fund your retirement, this overestimation can become problematic when it comes time to sell. 

If you plan on using your small business to help fund your retirement, you'll want to conduct a business valuation to help determine the future value of your business. That way, you reduce the risk of being surprised if your business isn’t worth what you thought it would be when it comes time for retirement. 

In addition, performing a business valuation can identify any factors that could lead to your business losing value in the future. For example, if your small business relies heavily on personal relationships you’ve built with your customers, the value of your small business may decrease once you step away.

On the other hand, your business may be operating in a growing industry, giving you a reason to believe that your small business may increase in value as you approach retirement.

5. Examine your other assets and investments

After evaluating the value of your business, it's time to do the same for your other assets and investments. From stocks and bonds to real estate, you’ll want to carefully assess the value of each of your assets and investments.

While doing this, be sure to keep in mind the income that you’d need your investments to produce in order to match your retirement goals. If your current investments don’t appear as if they’d make the necessary income to meet your retirement goals, you may want to explore different investment options.

6. Prepare your will

As the saying goes, “Nothing is certain except death and taxes,” you can prepare for the former by preparing a will when considering your small-business owner retirement plan options.

In the unfortunate event that you pass before your retirement, you’ll want to iron out what happens to your business following your passing. This may include passing the business onto a spouse, parent, or child in your life.

To help you throughout this process, you may want to seek the help of an estate planning attorney who can make sure you leave no boxes unchecked when creating your will.

7. Avoid touching your retirement savings too early

As you near retirement, it may become tempting to start dipping into your hard-earned retirement savings. But before doing so, it’s important to understand that you may be penalized for accessing your funds too early. In addition, early access to your retirement funds may lead to costly tax payments.

Plus, if the market is down when you withdraw your funds, you’re locking in your losses and missing out on potential growth once the market rebounds.

For example, withdrawals from an IRA or 401(k) account before you’re 59 and a half years old may be subject to a 10% penalty and federal income tax. To ensure you’re getting the most out of your retirement savings, be sure to do your research and determine how long you need to wait to avoid any penalties.

What happens after I retire as a small business owner?

A small-business owner’s retirement can vary from person to person. You may decide to sell or close your business and use the cash to fund retirement. On the other hand, you may prefer to pass your small business along to a successor (such as a family member, to maintain and grow their family’s wealth).

The success of this transition can directly determine your financial future, as the business's sale price will likely represent the largest portion of your retirement nest egg. The challenge lies in making sure that the business is valuable, transferable, and capable of operating without the founder well before the exit date.

What you can do to improve your valuation and smooth out your small business retirement process: 

• Organize and reconcile your financial records using accurate accounting software (such as QuickBooks Online) to prepare for a higher, more defensible business valuation.
• Fully fund the appropriate self-employed retirement plan up to the current 2025 IRS limits.
• Determine your planned exit—sale, transfer, or wind-down—and build a 5-year transition timeline so your business can function without you. 
• Prepare your legal documents, including an updated will and estate plan, to clarify the business's ownership and operation in the event of an unexpected event.

With a valuation based on careful planning, your future in retirement could be much more profitable than it might have been otherwise.

The 3 challenges of retiring as a small business owner

The reality is that retirement planning for an entrepreneur is fundamentally different—and far more complex—than it is for a strictly W-2 employee. You are your own plan administrator, CFO, and even investment committee.

That's a lot of pressure, and you're already running a business on top of all those roles. 

1. Choosing the right retirement plan

The "best" retirement plan maximizes your contributions and fits your specific business model. If you are a solo entrepreneur, the Solo 401(k) often allows the highest annual savings due to its dual contributions. Businesses with employees may consider simpler options, such as the SEP-IRA or the SIMPLE IRA, but you should carefully consider all your options. 

Solution: Choose the vehicle that aligns with your business's size, structure, and ability to handle compliance. Treat your retirement contribution as a mandatory business expense. 

While the IRS allows high limits, confirm that your cash flow can support these contributions—and always consult a financial advisor when in doubt. 

2. Understanding the social security self-employment tax

While you do earn Social Security credits like a W-2 employee as a small business owner, the process is different. As a self-employed person, you pay the full FICA tax (both the employee and employer portions), which totals 15.3% of your net earnings. This entire tax burden is your responsibility.

Solution: Use QuickBooks to accurately track and categorize expenses. With precise reporting, you can strategize the optimal Net Earnings from Self-Employment figure to balance tax liability while building maximum Social Security credit.

3. Balancing profit vs savings

In the end, every small business owner struggles with the ultimate question: Should you pour profits back into the business for growth, or save that cash for your own future?

The key is treating your retirement savings as a fixed business expense, just like rent. This discipline stops you from delaying contributions when profits fluctuate, ensuring your personal wealth builds steadily alongside your business.

Strategies that can help you address this and meet both goals simultaneously: 

Set up a consistent owner draw or salary schedule. Fund your retirement contribution directly from that draw to make the savings process nonnegotiable.

If you can, try to build two assets simultaneously to grow both your business's value and a separate, diversified personal wealth portfolio, securing your exit from two directions.

Use the QuickBooks Cash Flow Planner to visualize your future income and expenses, ensuring you only move excess operational cash into your retirement accounts.

Run your business with confidence

Now that you know how to retire as a small-business owner, you can continue running your business with confidence, knowing you’re taking the proper steps to achieve your retirement goals. From tracking expenses to assessing your small business’s income, accounting software can help inform your retirement plans.