Small-Business Owners, Employees Save More for Retirement Than Before Recession Average balances in small-business retirement plans increased by 20 percent between 2007 and 2012, according to a study from Fidelity Investments.

By Catherine Clifford

Opinions expressed by Entrepreneur contributors are their own.


Small-business owners and their employees who have retirement plans started saving even more after the Recession hit.

Small-business owners and their employees have been squirreling away money for retirement at an impressive clip over the past six years, according to a study of more than 200,000 businesses from financial services company Fidelity Investments. From 2007 through 2012, the collective balance of small-business retirement savings plans climbed by 20 percent, Fidelity found. The study looked at businesses with 10 employees or fewer that use Fidelity, one of the largest financial services providers offering retirement-plan services.

Related: We Need Smarter Business-Owner Retirement Plans, Not More (Opinion)

Having a retirement plan is not only critical for small-business owners themselves, but is also a draw for attracting and keeping top talent, says Ken Hevert, vice president of Fidelity Investments, in a statement. Confusion persists about retirement options, according to Fidelity surveys of small-business owners it has worked with. Here's a look at a few of the most common retirement options available for small-businesses and what differentiates them.

Self-Employed 401(k) Plan: A self-employed 401(k) plan allows a business owner to contribute more pre-tax income to retirement savings than any other plan, but is applicable for only sole proprietors or partnerships. There can be no employee working for the company, other than a spouse, who does not have at least part ownership of the business to be able to take advantage of the self-employed 401(k) plan. Also, there can be no plan to add employees.

Contributions to self-employed 401(k)s increased the most between 2007 and 2012, compared with other retirement savings plans, according to the Fidelity study.

Related: Will Today's Entrepreneurs Ever Retire?

Savings Incentive Match Plan for Employees (Simple Individual Retirement Account): A simple IRA plan is for businesses with 100 or fewer employees. Contributions to a simple IRA made by the employer are tax-deductible and contributions coming from the employees are taken out of income pre-tax, as with a 401(k). Sole proprietors and partnerships can opt for a Simple IRA, in addition to corporations and S Corps. Tax deferred contribution are less than with a 401 (k) plan.

Simplified Employee Pension plan (SEP IRA): A SEP IRA plan is funded by only the employer. As a business owner, any money you contribute to your employees' SEP IRA plan can be deducted as a business expense, which is a significant advantage. SEP IRA plans are available to both self-employed people and business owners with employees. Employees do not contribute to SEP IRA plans, but they can contribute to the same account under the traditional IRA guidelines. If you are a business owner and want to set up a SEP IRA plan, you will have to contribute the same percentage of your employees's income to his or her retirement account that you contribute into your own SEP IRA account.

Related: How to Protect Your Personal Finances From Business Risks

Do you have a retirement savings plan set up for your business already? If so, what kind do you have and why did you select that retirement plan? Leave a note below and let us know.

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Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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