Retirement Planning for Business Owners: Plan Types, Exit Options and 2026 Limits

Business owners face retirement questions that employees often do not. A large share of their wealth may sit inside one company, income can swing from year to year, and there is no employer plan unless the owner sets one up. Planning therefore runs on two tracks: building savings outside the business, and preparing the business itself for a transition.

This guide covers both. It compares the main retirement plan types using 2026 IRS limits, walks through common exit options, and looks at the tax, healthcare and income questions that tend to follow. A financial advisor in Long Beach can help coordinate these pieces so they work together rather than separately.

Key takeaways

• For 2026, the 401(k) employee deferral limit is $24,500, and total employer plus employee contributions to a defined contribution plan can reach $72,000 before catch-up amounts.
• Solo 401(k) and SEP IRA plans suit owners with few or no employees. SIMPLE IRAs cap employee deferrals at $17,000. Defined benefit and cash balance plans allow annual benefits up to $290,000 and can support larger deductions, with more cost and administration.
• A business is hard to value until a sale closes, so many owners compare several exit routes and start years ahead.
• A sale can create a one-time income spike that affects taxes now and Medicare premiums two years later.
• Healthcare before age 65 and the timing of Social Security are often the least-planned parts of an owner’s retirement.

Why retirement planning looks different for business owners

• Concentration. When most of your net worth is one company, its value is tied to your own role, your customers and your industry. Diversifying outside the business can reduce that dependence.
• Irregular income. Contributions that are flexible, such as SEP IRA or profit-sharing contributions, can follow the year’s results. Fixed commitments such as a defined benefit plan work best with steady profits.
• You are the employer and the employee. There is no default match or HR team. If you have staff, the plan you choose can also affect what you contribute for them.
• Healthcare. Without employer retiree coverage, an owner who retires before 65 arranges coverage individually.
• Mixed finances. Personal guarantees, loans and real estate leased to the business can complicate both a sale and an income plan.
• Time. Transferring a business can take years, so the planning window is longer than for a typical retiree.

Our overview of common financial mistakes that can derail retirement covers several of these in general terms, and a retirement planning review can put numbers on your own situation.

Your business as a retirement asset

For many owners, the company supplies part of retirement income, either through a sale or through ongoing earnings. Survey figures compiled by Project Equity show how loosely this is often planned: an Exit Planning Institute survey (2023) found 78% of owners lacked a formal transition team, and a 2024 Gallup figure it cites says about one-third of owners lack a long-term plan or are unsure what happens to the business after they leave.

Valuation is a range, not a number. What a business is worth depends on its earnings, how much of the work depends on the owner, customer concentration, the quality of its financial records and market conditions. A professional valuation, repeated every few years, gives a clearer picture than a rule of thumb, and it is still an estimate until a deal closes.

Common exit routes

Route	How it works	Things to weigh
Sale to an outside buyer	Lump sum, sometimes with an earn-out or seller note	Due diligence, taxes on the gain, and how long you stay involved after closing
Transfer to family	Often a gradual or installment sale	Family dynamics, fairness among heirs, and whether the next generation wants to run it
Sale to partners or key employees	Typically a buy-sell agreement or management buyout, often paid over time	How the buyers will fund payments, and whether insurance backs the agreement
Employee ownership	Sale to an employee stock ownership plan or worker cooperative	Legal and setup costs, valuation rules, and a longer payout
Step down gradually	Reduce hours while keeping ownership and income	You remain exposed to the business, and succession is still unresolved
Wind down	Close operations and sell assets	Often the lowest value for businesses that depend on the owner’s relationships

Taxes depend on how a deal is structured. Federal and California taxes can both apply to a sale, and California generally taxes capital gains as ordinary income. A CPA and an attorney are usually part of the conversation, and our estate planning work often touches buy-sell agreements, beneficiaries and trusts.

The concentration question. If the business sells later or for less than hoped, would the rest of your plan still hold up? Running a few scenarios, such as a lower price, a delayed closing or an earn-out that pays less than expected, can show how much of your retirement income depends on a single outcome. Building savings outside the company, covered in the next section, is one way owners reduce that dependence.

Retirement plans for business owners: 2026 comparison

The right plan depends on whether you have employees, how steady your income is and how much you want to set aside. The limits below come from the IRS’s 2026 limits announcement and Notice 2025-67, as summarized by a benefits law firm, with plan rules from IRS Publication 560.

Plan	Often considered when	2026 limits	Things to weigh
Solo 401(k)	Owner (and spouse) with no other employees	$24,500 employee deferral, plus $8,000 catch-up at 50+ ($11,250 at ages 60-63); total with employer contributions up to $72,000 before catch-up	Employer contributions for self-employed owners are figured on net self-employment earnings using IRS worksheets; adding employees changes the plan
SEP IRA	Few or no employees; simple setup	Employer contributions only: up to $72,000 or 25% of compensation, whichever is less (compensation counted up to $360,000); owner’s own limit is effectively lower	No employee deferrals or catch-up; the same percentage generally applies to every eligible employee
SIMPLE IRA	Up to 100 employees; low administration	$17,000 employee deferral, plus $4,000 catch-up at 50+ ($5,250 at ages 60-63); employer 3% match or 2% nonelective	Lower limits; generally cannot be paired with another plan; setup window runs January 1 to October 1
401(k) with employees	Staff to cover; wants higher limits, Roth or loan features	$24,500 deferral; $72,000 total; highly compensated employee threshold $160,000	Testing and administration; safe harbor designs can simplify testing
Defined benefit or cash balance	High, steady income; often older owners wanting larger deductions	Maximum annual benefit $290,000; contributions depend on age and actuarial calculations	Actuary, annual funding commitments, and coverage of eligible employees
Traditional or Roth IRA (personal)	Added to a workplace plan	$7,500, plus $1,100 catch-up at 50+	Deductibility and Roth eligibility depend on income and plan coverage

How owners often compare these

• No employees: A Solo 401(k) can allow a larger total contribution than a SEP IRA at lower incomes, because the employee deferral is added to the employer contribution. A SEP IRA is simpler to run.
• With employees: The cost of contributions for staff becomes part of the decision. SIMPLE IRAs and safe harbor 401(k) plans are common choices, and defined benefit plans carry the highest commitments.
• Higher income closer to retirement: Some owners combine a 401(k) profit-sharing plan with a cash balance plan to increase deductions, which works best when profits are steady.
• Timing: Rules differ by plan, and some plans can be set up or funded after year-end. Because the SIMPLE IRA setup window generally closed October 1, a new SIMPLE IRA for 2026 is usually off the table, while other options may remain. A CPA or plan provider can confirm deadlines.

California note. California law generally directs employers with at least one employee to either offer a qualified retirement plan or register with CalSavers, the state-run program. Employers that sponsor a plan or have no employees other than owners can be exempt, so it is worth confirming which applies to your business.

If you have old 401(k) accounts from earlier jobs, an IRA rollover is one way owners consolidate them as part of this review.

Taxes, healthcare and income after the business

A sale can spike one year’s income. Medicare’s income-related surcharge (IRMAA) looks at your income from two years earlier, so a sale in 2026 can affect premiums in 2028. The standard 2026 Part B premium is $202.90 a month, and surcharges can raise it to as much as $689.90 in the highest bracket. Structuring a sale or spreading income across years is a conversation for your CPA and advisor together.

Withdrawals and conversions. Traditional plan withdrawals are taxed as ordinary income. California does not tax Social Security benefits, but it taxes other retirement income at rates up to 13.3% (see our explainer on California and Social Security). The years between stepping back from the business and the start of IRS-set minimum withdrawals (age 73 or 75, depending on birth year) can be lower-income years, and some owners evaluate Roth conversions then.

Healthcare before and after 65. Without employer retiree coverage, an owner who steps back before 65 arranges individual coverage, often through Covered California. After 65, Fidelity’s 2026 estimate is $185,500 for one person, excluding long-term care, and roughly $371,000 for a couple. Our guide to healthcare costs in retirement breaks down premiums, surcharges and long-term care, and our guide to retiring at 55 covers the pre-Medicare gap.

Social Security and income planning. Claiming age affects the benefit for life, and it interacts with sale proceeds and plan withdrawals. A Social Security analysis can compare claiming ages, and our retirement income strategy guide and income planning services cover how to combine business proceeds, plan withdrawals and benefits into one income plan.

A timeline many owners follow

1. 10 or more years out: Get a baseline valuation, note how much of the business depends on you, and build savings outside it through a plan from the table above.
2. 5 to 10 years out: Narrow the likely exit route, update any buy-sell agreement, and tidy financial records so a buyer or successor can read them.
3. 3 to 5 years out: Assemble a transition team (CPA, attorney, advisor and valuation professional) and model scenarios, including a lower price or a delayed closing.
4. 1 to 3 years out: Work through deal structure and taxes, review beneficiary designations and estate documents, and map healthcare coverage for the first years after exit.
5. After the exit: Set a withdrawal order, review Roth conversion years, enroll in Medicare around age 65, and revisit the plan annually.

Long Beach business owners

Owners in the Long Beach area run everything from port-related and logistics firms to professional practices and local retail, and many share the same questions: how to value the business, how to fund retirement outside it, and how California taxes affect the result. A local financial advisor in Long Beach can add regional context, including California income tax and CalSavers, to the plan.

Frequently asked questions

Which retirement plan fits a business owner?

It depends on whether you have employees, how steady your income is and how much you want to set aside. Solo 401(k) and SEP IRA plans are common for owners without staff, SIMPLE IRAs and 401(k) plans for owners with employees, and defined benefit or cash balance plans for high, steady incomes. The comparison table above shows the 2026 limits.

How much can a business owner contribute in 2026?

A 401(k) allows $24,500 in employee deferrals, plus catch-up amounts at 50 and older, and up to $72,000 in total with employer contributions before catch-ups. SEP IRA contributions are capped at $72,000 or 25% of compensation, and defined benefit plans allow annual benefits up to $290,000. Your own limit depends on your earnings and plan design.

Can the sale of my business serve as my retirement plan?

It can fund part of retirement, but the price and timing are uncertain until a deal closes. Many owners also build savings outside the business so that a lower or delayed sale does not derail their income.

How early might I start exit planning?

Transitions can take years, so many owners begin five to ten years ahead. Starting early leaves more time to improve the business’s value, set up a buyer or successor, and plan the tax side.

How does selling my business affect Medicare premiums?

Medicare looks at income from two years earlier, so a large gain from a sale can raise premiums two years later through IRMAA. Timing and deal structure can influence how much income lands in a single year.

How does CalSavers affect California business owners?

California directs employers with at least one employee to offer a qualified plan or register with the state-run CalSavers program, with exemptions for employers that sponsor a plan or have no employees other than owners. Check the current registration deadline on the CalSavers site.

Bringing it together

Retirement planning for a business owner combines two projects: building savings outside the company and preparing the company for a transition. Looking at plan limits, exit routes, taxes and healthcare together makes the trade-offs easier to see.

If you would like help putting numbers to your own situation, Randall Wealth Management Group offers a complimentary consultation. As a financial advisor in Long Beach, our team can walk through your income, retirement plan options and long-term goals. You can also browse our retirement and wealth management services, see how your savings compare in our guide to average retirement savings by age, or read more about Trevor Randall.

Sources

• IRS, 2026 retirement plan limits announcement (IR-2025-111, November 13, 2025)
• Schechter Benefits Law Group, summary of IRS Notice 2025-67
• IRS Publication 560, Retirement Plans for Small Business (2025)
• CalSavers employer site
• Project Equity, business owner statistics on exits and succession
• Medicare.gov, 2026 Medicare costs fact sheet and MOAA, 2026 Part B premiums
• CNBC, Fidelity’s 2026 retiree health care estimate
• Randall Wealth Group, Does California Tax Social Security?

Randall Wealth Management Group and Vanderbilt Financial Group are separate and unaffiliated entities. 

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