Business owners have a special opportunity when planning for their financial future—when the time comes to retire, they can sell their business and combine those proceeds with money that they’ve been saving over the years in a retirement account.
However, some business owners discover that when it’s time to retire, they haven’t planned carefully enough (or at all) for life after owning a business.
Unlike employees with pensions or 401(k)s, entrepreneurs need to navigate saving for retirement as they grow their business and plan for their exit.
They also need to develop a tax-smart retirement savings withdrawal plan that aligns with their business exit and retirement. Otherwise, both personal and professional goals can slip out of reach.
Here’s what business owners need to know to avoid common planning pitfalls and to retire on their own terms.
Key Takeaways
- Business owners should always build personal retirement savings as they build their business to avoid relying solely on proceeds from the sale of their company when they retire.
- Retirement accounts such as SEP IRAs, SIMPLE IRAs, and Solo 401(k)s offer flexible saving and investing options for entrepreneurs with different goals.
- Creating the right business exit strategy early can help maximize the value of a sale, minimize taxes, and ensure a smooth transition.
Set Your Retirement Goals
As an entrepreneur, understanding your personal vision for retirement—whether it incorporates travel, family support, or philanthropy—makes it easier to create a financial roadmap that isn’t tied entirely to a future sale of your business.
Set your retirement goals based on this vision, and work toward them by both, building your business and adding to your savings consistently.
“Many business owners overestimate the value of their business and delay saving outside of it,” says Christopher Stroup, founder of Silicon Beach Financial.
He says you should treat business and personal goals as “two parallel tracks.” Saving separately ensures you’re retiring by choice, not because the business demands it.
Chris Diodato, CFP and founder of WELLth Financial Planning, echoes this. “It’s paramount to have at least some separate funds not associated with the business earmarked for retirement savings,” he said.
Choose the Right Retirement Account
Business owners have several powerful retirement savings options. For those running solo, SEP IRAs and Solo 401(k)s offer high contribution limits with low costs and minimal administrative hassle.In 2025, individuals can contribute up to $23,500 to a solo 401(k).
“For self-employed people, an individual 401(k) is often the most attractive option,” says Justin Pritchard, founder of Approach Financial.
Solo 401(k)s allow you to choose between pretax and Roth contributions, and even offer features like plan loans and mega backdoor Roth strategies, Pritchard notes.
For businesses with employees, SIMPLE IRAs and traditional 401(k)s are common. However, Diodato warns that SIMPLE IRAs have “too low” contribution limits for ambitious savers. Diodato often recommends SEP IRAs for their simplicity.
As a business owner, you’ll need to evaluate and weigh the flexibility, employee needs, and contribution goals to help pick the right fit for you.
Build a Business Exit Strategy
Without an exit plan, business owners risk having to sell in a rush—or for less than their company is worth.
“Start early, ideally three to five years before exit,” Stroup advises. Good exit planning includes determining a good business valuation, having a clear succession or sale strategy, and considering your preferred timeline for retirement.
“A carefully planned exit strategy can maximize a business sale price, minimize tax frictions, and keep clients happy through a smooth and long-term transition period,” says Diodato.
Whether selling to employees, a competitor, or passing the business to family, early planning creates better outcomes and more peace of mind.
If you have questions or need guidance, work with an expert to navigate your business exit.
Avoid Tax Surprises
Selling a business and tapping retirement accounts are taxable events, but proactive planning can soften the tax blow.
For example, spreading sale income over multiple years, using installment sales, or structuring deals strategically can lower taxes, Diodato says.
Stroup also recommends exploring long-term capital gains treatment or qualified small business stock exclusions where possible.
After retirement, strategic Roth conversions and tax-efficient withdrawals can help preserve more of your wealth.
If you have a traditional individual retirement account (IRA), which has required minimum distributions (RMD), take just that amount to limit your tax bill and to keep as much money as possible growing tax-deferred.
Plus, work consider working with a financial advisor to iron out the specifics, like the best age to retire, when to start collecting your Social Security benefits (e.g., at full retirement age, early, or at age 70) and how to avoid outliving your savings.
Tip
Income spreading is a common strategy that some high-income earners use to lower tax bills. If you sell a business and agree to an installment sale (meaning you receive at least one or more payments after the tax year in which the sale occurred), you might be able to spread the taxable income across multiple tax years instead of paying it all at once.
The Bottom Line
Retiring when you own a business isn’t just about selling at the right time, it’s about planning carefully, saving wisely, and staying flexible.
Starting building your personal retirement savings early, select the right retirement account, find an advisor your trust, and craft a clear exit strategy to help you to retire securely and confidently.
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