At The Money: How to Max Out Your Small Business Retirement Plan

Summary of At The Money: How to Max Out Your Small Business Retirement Plan

by Bloomberg

15m•April 29, 2026
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Overview of Bloomberg: At The Money — How to Max Out Your Small Business Retirement Plan

This episode breaks down the main retirement-plan options available to small business owners, solo practitioners, and people with side gigs. Host Barry Ritholtz and retirement-plan specialist Dan LaRosa explain how SEP IRAs, solo 401(k)s, and mega backdoor Roth strategies differ, how much you can contribute, and when each structure makes the most sense. The big message: the “best” plan depends on your income, whether you want pre-tax or Roth savings, how many employees you have, and how much complexity you’re willing to manage.

Main Retirement Plan Options for Small Business Owners

1) SEP IRA

  • Simplest option to set up and maintain.
  • Contributions are made only by the employer.
  • Often the default recommendation from CPAs because it’s easy.
  • Best for:
    • Higher earners who want straightforward tax-deferred savings
    • Owners who don’t want ongoing plan administration

2) Solo 401(k)

  • More flexible than a SEP IRA.
  • Allows both employee deferrals and employer profit-sharing contributions.
  • Better for owners with variable income or lower income who still want to maximize contributions.
  • Can be especially powerful when paired with a mega backdoor Roth feature.

3) Mega Backdoor Roth Solo 401(k)

  • A “cheat code” for getting large Roth contributions into a solo plan.
  • Lets eligible business owners build Roth savings up to the plan limit.
  • Especially attractive if you want tax-free growth rather than tax-deferred savings.

4) Defined Benefit / Cash Balance Plan

  • Mentioned as an additional tool once the basic plans are already in place.
  • Can make sense for high earners who want even more tax deferral.

Contribution Limits and How They Work

The Big Number: $72,000

  • The episode frames the overall annual plan limit as $72,000 per plan.
  • Important nuance: the limit applies separately to each eligible plan.
  • The only amount that aggregates across all 401(k) plans is the employee deferral limit.

SEP IRA contribution mechanics

  • SEP contributions are based on income.
  • Rough rule of thumb discussed:
    • You can contribute up to 20% of net income
    • To hit the full limit, you’d need roughly $360,000 of income

Solo 401(k) contribution mechanics

  • Solo 401(k)s allow greater flexibility.
  • Rough rule of thumb discussed:
    • About $235,000–$240,000 of income can get you to the full limit
  • More useful if income is lower or fluctuates year to year.

Mega Backdoor Roth

  • If structured properly, it can let you put the full amount into Roth savings.
  • The episode emphasizes this is hard to beat if Roth contributions are the goal.

Which Option Fits Which Situation?

Best for flexibility

  • Solo 401(k)
    Especially good for:
    • Variable or lower income
    • Owners who want to maximize savings even in lean years
    • People wanting Roth access via mega backdoor Roth

Best for simplicity

  • SEP IRA
    Especially good for:
    • High earners
    • Owners who want minimal paperwork
    • People who don’t need employee deferrals or Roth features

Best for Roth savings

  • Solo 401(k) with mega backdoor Roth
    • The strongest option if your priority is after-tax retirement savings.

Best for pure tax deferral at high income

  • SEP IRA
    • If income is consistently strong and Roth isn’t a priority, SEP can be very effective.

Employees, Spouses, and Multiple Owners

Solo 401(k) employee rules

  • Once you have an eligible non-owner W-2 employee, it is no longer a true “solo” 401(k).
  • That can complicate maxing out contributions, since the owner may need to contribute for employees too.

SEP IRA employee rules

  • SEP eligibility can be triggered by the “3-of-5” rule:
    • If an employee works for you in 3 of the last 5 years and earns above a small threshold, they may need to be included.
  • In a SEP, employees receive the same percentage of compensation as the owner, which can get expensive.

Spouses

  • A spouse can be included if they are a legitimate employee receiving wages.
  • In a solo practice, adding a spouse can significantly increase household retirement savings.
  • The episode notes the spouse can contribute up to their own limit based on compensation.

Multiple partners

  • A solo 401(k) can still work with multiple partners, as long as there are no non-owner employees.
  • This gives more flexibility than a SEP.
  • In a SEP, contributions must be pro rata and more rigid across participants.

Compliance, Administration, and Penalties

SEP IRA

  • Easiest to administer.
  • Usually just a few setup forms.
  • No annual filing requirement once established.

Solo 401(k)

  • More paperwork than a SEP.
  • Key warning: once total plan assets exceed $250,000 on December 31 of a plan year, you must file Form 5500-EZ.
  • Penalties for missing it can be severe:
    • $250 per day, up to $150,000
  • The episode stresses that enforcement has increased in recent years.

Deadlines and Funding Rules

Can you still fund prior-year contributions?

  • Yes — according to the discussion, there is still time to set up and fund for the prior tax year in February 2026.

SEP IRA timing

  • Can generally be established and funded for the prior year up to the tax filing deadline plus extension.

Solo 401(k) timing

  • More flexible than it used to be.
  • If established by April 15, you may be able to make both employee and employer contributions for the prior year.
  • If set up after April 15, you’re more limited and may only be able to make employer/profit-sharing contributions.
  • To reach the full limit, funding by the extended filing deadline matters.

Creditor Protection: SEP vs Solo 401(k)

Key distinction

  • Traditional employer 401(k)s and defined benefit plans have strong ERISA creditor protection.
  • A common misconception is that solo 401(k)s get the same enhanced ERISA protection — they do not.

Practical takeaway

  • SEPs and solo 401(k)s are more like IRAs in terms of creditor protection.
  • If you work in a litigious profession, it may be wise to roll some balances into an employer 401(k) or defined benefit plan if available.

Bottom Line and Action Items

Main takeaway

  • Small business owners have powerful retirement-saving tools, but the right one depends on:
    • Income level
    • Desire for Roth vs pre-tax savings
    • Whether you have employees
    • How much administrative complexity you can handle

Action steps

  • Review whether a SEP IRA or solo 401(k) fits your business structure.
  • Consider whether a mega backdoor Roth feature is available and worthwhile.
  • Check deadlines for prior-year funding.
  • Make sure you understand filing obligations, especially Form 5500-EZ.
  • Talk with a financial advisor, accountant, or tax professional before setting up the plan.

Episode’s practical message

If you’re a small business owner or solo practitioner and haven’t used these plans yet, this can be a major opportunity to build wealth tax-efficiently over the next 10–20 years.