Table of Contents
- Why 2026 Is a Big Year for Business Owner Retirement Savings
- 2026 401(k) Contribution Limits: The Numbers You Need to Know
- Solo 401(k) vs. Traditional 401(k): Which Is Right for Your Business?
- Maximizing Employer Contributions Through Profit Sharing
- The SECURE 2.0 Catch-Up Opportunity (Ages 60-63)
- Common Mistakes That Cost Business Owners Thousands
- Building Your Complete Retirement Strategy
Why 2026 Is a Big Year for Business Owner Retirement Savings
If you're a business owner in Stuart, FL, you already know that running a company comes with plenty of financial decisions. But here's one that often gets pushed to the back burner: maximizing your retirement contributions.
The good news? 2026 brings higher contribution limits and expanded catch-up provisions that can help you shelter more income from taxes while building serious wealth for the future. Whether you're running a solo consulting practice on the Treasure Coast or managing a team of employees, understanding these changes could mean tens of thousands of dollars in tax savings and retirement growth.
At Davies Wealth Management, we work with business owners across South Florida who want to make the most of these opportunities. Let's break down exactly what you need to know.
2026 401(k) Contribution Limits: The Numbers You Need to Know
The IRS has bumped up the limits for 2026, and they're worth paying attention to:
Employee Deferral Limits
- Standard contribution: $24,500 (up from $23,500 in 2025)
- Catch-up contribution (age 50+): Additional $8,000, bringing your total to $32,500
- Enhanced catch-up (ages 60-63): Additional $11,250, bringing your total to $35,750
Combined Employee + Employer Limits
Here's where things get interesting for business owners:
- Total combined limit: $72,000 (up from $70,000 in 2025)
- With catch-up (age 50+): $80,000
- With enhanced catch-up (ages 60-63): $83,250
That's a potential $83,250 you can funnel into tax-advantaged retirement savings in a single year. For a business owner in a high tax bracket, the immediate tax savings alone can be substantial.
Solo 401(k) vs. Traditional 401(k): Which Is Right for Your Business?
Not all 401(k) plans are created equal, and choosing the right structure can dramatically impact how much you're able to contribute.
The Solo 401(k) Advantage
If you're self-employed or run a business with no full-time employees (other than a spouse), a Solo 401(k) might be your golden ticket. Here's why:
- Wear two hats: You contribute as both the employee AND the employer
- Higher contribution potential: You can max out employee deferrals ($24,500) plus contribute up to 25% of your net self-employment income as employer profit-sharing
- Roth option available: Many Solo 401(k) plans allow Roth contributions for tax-free growth
- Loan provisions: Borrow up to $50,000 or 50% of your vested balance
Traditional 401(k) for Businesses with Employees
Running a larger operation? A traditional 401(k) plan comes with more administrative requirements but offers flexibility in plan design. You can structure employer matching and profit-sharing contributions to benefit you as the owner while also providing competitive benefits that help attract and retain talent.
The key is working with an advisor who understands both sides of the equation. As we often discuss on The Closing Few podcast, the right retirement plan structure can be a game-changer for business owners.
Maximizing Employer Contributions Through Profit Sharing
Here's where business owners really pull ahead. Beyond your employee deferrals, you can make employer profit-sharing contributions that push you toward that $72,000 combined limit.
How Profit Sharing Works
As the business owner, you decide each year whether to make profit-sharing contributions and how much. This flexibility is huge because:
- Good year? Max out contributions to reduce your tax bill
- Tight year? Scale back or skip employer contributions entirely
- Variable income? Adjust your strategy as your business evolves
The Math in Action
Let's say you're a 55-year-old business owner in Stuart earning $300,000 in net self-employment income:
| Contribution Type | Amount |
|---|---|
| Employee Deferral | $24,500 |
| Catch-Up (Age 50+) | $8,000 |
| Employer Profit-Sharing | $47,500 |
| Total | $80,000 |
That's $80,000 in tax-deferred savings. If you're in the 32% federal tax bracket, you're looking at roughly $25,600 in immediate federal tax savings alone: not counting Florida's lack of state income tax (one of the perks of doing business on the Treasure Coast).
The SECURE 2.0 Catch-Up Opportunity (Ages 60-63)
The SECURE 2.0 Act introduced a special provision that many business owners are still unaware of. If you're between ages 60 and 63, you can contribute an enhanced catch-up of $11,250 instead of the standard $8,000.
This is a limited window: once you hit 64, you drop back to the regular catch-up amount. So if you're in this age range, 2026 is the year to take full advantage.
Why This Matters
Think about it: that extra $3,250 per year (compared to the standard catch-up) might not sound massive. But invested over time with compound growth, it adds up. And if you're playing catch-up on retirement savings after years of reinvesting in your business, every dollar counts.
Common Mistakes That Cost Business Owners Thousands
Over the years at Davies Wealth Management, we've seen plenty of smart business owners leave money on the table. Here are the most common pitfalls:
1. Only Contributing the Employee Portion
Many business owners max out their employee deferrals and call it a day. But if you're not also making employer contributions, you're missing out on potentially $40,000+ in additional tax-advantaged savings.
2. Waiting Until Year-End
Procrastination is expensive. The earlier you contribute, the more time your money has to grow. Plus, scrambling in December often leads to missed opportunities or errors.
3. Ignoring the Roth Option
Yes, traditional pre-tax contributions provide immediate tax savings. But Roth 401(k) contributions grow tax-free and can be withdrawn tax-free in retirement. For business owners expecting higher income in the future: or concerned about future tax rates: a Roth strategy deserves consideration.
4. Not Coordinating with Your Overall Plan
Your 401(k) is just one piece of the puzzle. It should work alongside your estate planning strategy, business succession plan, and overall wealth management approach.
5. DIY Plan Administration
Solo 401(k) plans are relatively simple, but traditional 401(k) plans come with compliance requirements, testing, and filing obligations. Cutting corners here can result in IRS penalties and plan disqualification.
Building Your Complete Retirement Strategy
Maximizing your 401(k) is a powerful move, but it's most effective when it's part of a comprehensive financial strategy. Here's how to think about the bigger picture:
Coordinate Multiple Retirement Vehicles
Depending on your situation, you might also benefit from:
- Defined benefit plans: For very high earners, these can allow contributions exceeding $200,000 annually
- Cash balance plans: A hybrid approach that can work alongside your 401(k)
- IRAs: Backdoor Roth strategies for additional tax-free growth
Plan for the Transition
What happens when you're ready to step back from the business? Your retirement income strategy needs to account for the shift from business income to portfolio withdrawals.
Work with Specialists Who Understand Business Owners
Generic financial advice doesn't cut it when you're juggling business cash flow, personal finances, employee benefits, and tax optimization. You need an advisor who gets the complexity.
Ready to Maximize Your 2026 Contributions?
The contribution limits are set. The enhanced catch-up provisions are in place. The question is: are you positioned to take full advantage?
At Davies Wealth Management, we specialize in helping Stuart-area business owners build retirement strategies that actually work with their businesses: not against them. Whether you're exploring a Solo 401(k), optimizing an existing plan, or coordinating retirement savings with your broader wealth management goals, we're here to help.
Get in touch with Davies Wealth Management to start the conversation. Your future self will thank you.
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