5 Retirement Planning Mistakes Business Owners Make Before Age 50
Sam's List Editorial | 2026-06-06
5 Retirement Planning Mistakes Business Owners Make Before Age 50 Business owners are not better at retirement planning than employees. They're often worse — because they have more decisions to make, more tools available to them, and no HR department prompting them to use any of them. An employee has a 401(k) with an automatic enrollment default. A business owner has a blank canvas and a dozen structuring options, none of which happen automatically, and all of which require someone to initiate them. The result is that a lot of business owners between 35 and 50 are generating significant income and building almost no tax-advantaged wealth — while simultaneously carrying a false confidence that the business will take care of retirement someday. Here are five specific mistakes that compound badly when made before 50, and what to do instead. 1. Treating the Business as the Retirement Plan This is the most common mistake and the most expensive one. A business is a single, illiquid asset with no reliable buyer, no reliable price, and a value that is entirely dependent on conditions you don't fully control when you're ready to exit. A software business worth $4 million on a strategic multiple today might be worth $1.5 million in a downturn year. A services firm worth a multiple of EBITDA assumes that EBITDA continues — and it may not if key client relationships are tied to the founder. Business owners who retire comfortably have liquid assets alongside their equity, not instead of it. The exit proceeds can be a windfall. They shouldn't be the plan. Building a parallel portfolio of liquid, diversified assets while operating the business doesn't reduce the business's value — it reduces the risk that a failed or delayed exit destroys your retirement. 2. Not Maximizing a Solo 401(k) or SEP-IRA in High-Income Years A business owner earning $300,000 can contribute up to approximately $70,000 to a solo 401(k) in 2026 through a combination of employee deferrals and employer contributions. A SEP-IRA allows contributions up to 25% of net self-employment income, with its own limits. Verify the specific 2026 contribution limits with your advisor at the time of your review — the IRS adjusts them annually for inflation. Most business owners in high-income years are not maxing these. They either don't have the plan set up, they contribute a modest amount without realizing what's possible, or they're saving in taxable accounts because the business checking account is more convenient. The tax math is significant: a $70,000 contribution to a solo 401(k) at a 37% marginal...
