Believe it or not, choosing the wrong retirement plan can quietly cost you tens or even hundreds of thousands of dollars over your lifetime. I see it all the time. Entrepreneurs know they should be saving for retirement, but they get overwhelmed by the choices. Roth IRA. Traditional IRA. SEP IRA. SIMPLE IRA. Solo 401(k). HSA. Before long, retirement planning turns into alphabet soup, and many people end up doing nothing at all.
After more than 25 years as both a CPA and attorney, I've found the best retirement strategy isn't about chasing the newest account or the biggest tax deduction. It's about following a simple roadmap and building one piece at a time. Whether you're running a full-time business or earning income from a side hustle, here's the retirement planning strategy I teach my clients.
A lot of people hear the phrase "self-employed" and picture someone who owns a storefront or employs dozens of people. That's not what I mean.
Today, one out of every three Americans has some type of side hustle. If you're consulting, freelancing, driving Uber, selling products online, working as a Realtor, receiving 1099 income, operating a small business, or earning money on a Schedule C, you're self-employed. It doesn't even matter whether you're operating as a sole proprietor, LLC, or S corporation. The real question is simple: Are you earning business income? If the answer is yes, these retirement planning opportunities may be available to you.
Here's another point that surprises people. You can absolutely have a W-2 job with a company 401(k) and still have a completely separate retirement strategy for your side business. Your side hustle can open the door to an entirely different retirement plan that works alongside your employer's plan. Instead of choosing one or the other, you may be able to contribute to both. Now we're talking about building real wealth.
Before we talk about Solo 401(k)s, HSAs, or any advanced planning strategies, I want you to master the basics. Fund your IRA every single year. That's where almost everyone should start.
For 2026, you can contribute $7,500 if you're under age 50 or $8,600 if you're 50 or older. If you're married, both spouses can contribute, even if only one spouse is earning the income. Think about what that means. A married couple could be putting away well over $15,000 every year before they even start looking at larger retirement plans. Now, I know that's a sacrifice. For many families, that's the equivalent of another car payment every month. But if you don't intentionally pay your future self first, that money has a way of disappearing somewhere else. This is why I tell people to automate it. Set up monthly transfers. Put it on autopilot. Make it happen whether you feel like it or not. Wealth isn't usually built because someone made one brilliant investment. It's built because they consistently did the right things for a long time.
Once you've committed to funding an IRA, the next question is obvious. Traditional IRA or Roth IRA? You already know where I stand. I love the Roth IRA. That doesn't mean Traditional IRAs are bad. They absolutely have a place. But if we're talking about long-term wealth building, I believe the Roth wins almost every time. Here's why.
A Traditional IRA generally gives you a deduction today. The money grows tax deferred, but every dollar you withdraw later is taxable. The Roth works the opposite way. You pay taxes on the contribution today, but once the money is inside the account, it grows tax free and comes out tax free. I've always said I'd rather pay tax on the seed than the harvest.
Think about that for a minute. When you're making the contribution, you're paying tax on a relatively small amount of money. But what happens twenty or thirty years later? That account may have doubled, tripled, or grown tenfold. With a Traditional IRA, you're paying taxes on the much larger account balance. With a Roth IRA, you've already paid the tax bill. The larger the account becomes, the bigger the advantage.
People love to tell me, "Well Mark, it depends on your tax bracket." Sure. There are variables. Income matters, age matters, current deductions matter, future tax rates matter. But after running the numbers over and over again throughout my career, I keep arriving at the same conclusion. The Roth wins. Especially if you're young. Time becomes your greatest asset because every year that account compounds, you're creating more tax-free wealth instead of building a future tax bill. The larger the account becomes, the bigger the advantage.
Some people look at the annual Roth IRA contribution limit and think, "Seven or eight thousand dollars isn't going to make a difference." That's the wrong way to look at it. This is a "get-rich slow" strategy.
Wealth is rarely built with one big contribution or one lucky investment. It's built by consistently doing the right things year after year. Honestly, get-rich-quick schemes make me nervous. There's usually a hidden fee, a hidden risk, or someone trying to separate you from your money.
If you're funding your Roth IRA every year and investing in assets you understand, that account has decades to grow. Over time, those annual contributions can turn into a seven-figure, tax-free retirement account. That's why I don't get caught up in the annual contribution limit. I focus on what those contributions can become 20 or 30 years from now.
Another myth I hear all the time is "I make too much money for a Roth IRA." Maybe. Maybe not.
Even if your income exceeds the normal Roth IRA contribution limits, that doesn't automatically eliminate Roth planning because that’s where the Backdoor Roth IRA comes in.
I've written extensively about this strategy because it's one of the biggest misconceptions in retirement planning. Many successful entrepreneurs assume Roth contributions aren’t available simply because their income increased. That's usually not true.
If you're in that situation, don't stop exploring Roth strategies just because someone told you you make too much money.
Now let's talk about the part of retirement planning that doesn't get enough attention: what you're actually investing in.
I'm not an investment advisor, and I don't make a dime based on what you invest in. But I do believe one thing very strongly. I want you investing in what you know. That's called self-directing, and it's one of the most powerful wealth-building strategies available.
Think of your Roth IRA like a vehicle. When you're first getting started, it's perfectly fine to let someone else drive for a while. Maybe you're investing in ETFs, mutual funds, or other diversified investments while you're learning the basics and building your account. There's nothing wrong with that. But eventually, I want you driving the car.
I don't want you sitting in the back seat forever while someone else decides what happens with your retirement. That's the real power of a self-directed retirement account. Once you understand the rules, your Roth IRA doesn't have to be limited to Wall Street. It can invest in rental property, private lending, real estate partnerships, cryptocurrency, gold and silver, private companies, notes, and many other alternative investments.
Now notice I didn't say invest in everything. I said invest in what you know.
If you've spent the last 20 years building expertise in real estate, why wouldn't you let your retirement account benefit from that knowledge? If you've built a successful business or developed expertise in a particular industry, why should your retirement dollars be limited to investments someone else picked for you?
This is where retirement planning starts getting exciting. When you combine consistent Roth IRA contributions with investments you truly understand, the math changes dramatically. Let's say a married couple contributes roughly $16,000 a year between the two of them and earns a 15% annual return by investing in opportunities they know well. Over 20 years, they're approaching $2 million. And here's the best part: that growth can be tax free.
That's why I spend so much time teaching self-directing. Choosing the right retirement account is important, but what happens inside that account can have an even bigger impact on the wealth you build over time.
The next stop on my retirement roadmap is the Health Savings Account, or HSA.
Most people think of an HSA as nothing more than a checking account for doctor's bills. That's selling it way short. I like to say it’s like a Roth on steroids because it's the only account that can potentially give you three tax benefits at the same time. You receive a tax deduction when you contribute, the money grows tax deferred, and if you use it for qualified medical expenses, it comes out tax free. That's a pretty incredible combination.
Now, not everyone qualifies. You have to be covered by a high deductible health plan, and that's something you'll want to discuss with your insurance professional. But if you're eligible, I don't want you overlooking this account just because it has the word "health" in its name.
The reality is that healthcare is one of the biggest expenses people face in retirement. Whether it's prescriptions, Medicare premiums, long-term care, or unexpected medical bills, most retirees are going to spend a substantial amount of money on healthcare. Why not build a tax-advantaged bucket that's specifically designed to help cover those costs?
And remember, you don’t have to reimburse yourself every time you have a medical expense. There's nothing wrong with doing that, but if you can afford to pay today's medical bills out of pocket, consider leaving the money inside your HSA invested instead. Save your receipts, let the account continue growing, and years down the road you can reimburse yourself for those same qualified expenses while allowing decades of tax-advantaged growth to work in your favor.
That's the difference between thinking about today's doctor's bill and thinking about retirement. I want you playing the long game whenever you can.
Once you've consistently funded your Roth IRA and taken advantage of an HSA if you're eligible, it's time to look at the Solo 401(k). If you're self-employed and don't have full-time employees, this plan can be a game changer.
One of the reasons I love the Solo 401(k) is the flexibility it gives business owners. You're wearing two hats. You're both the employee and the employer, which means you have two opportunities to contribute. As the employee, you can make elective deferrals. As the employer, your business can make additional profit-sharing contributions. Those two buckets work together to create contribution limits that are dramatically higher than what most people think is possible. Once your business starts producing meaningful profits, it's time to stop thinking only about IRAs and start taking advantage of what a Solo 401(k) can do.
Another feature I love is that many Solo 401(k) plans include a Roth option. Just because you're contributing larger amounts doesn't mean you have to give up the opportunity to build tax-free wealth. Depending on your overall tax strategy, you may be able to combine traditional and Roth contributions in a way that gives you the best of both worlds.
The biggest mistake I see isn't choosing the wrong plan. It's waiting too long to start. Business owners tell themselves they'll set up the Solo 401(k) after they have a better year, after they hire another employee, after revenue grows, or after life slows down a little. There's always another reason to wait, and another year quietly slips by.
The problem is you don't get those years back. Retirement planning works because of time and compounding. Every year you delay is another year your money isn't working for you. The sooner you put the right plan in place, the longer your investments have to grow, and that's where real wealth is built.
If your spouse legitimately works in the business, they may also be eligible to participate in the retirement plan. That means instead of building one retirement account, you're potentially building two. Now both spouses are creating tax-advantaged wealth together, and the contribution opportunities can increase dramatically. That's one of the biggest advantages family businesses often have. The business isn't just creating income today. It's creating opportunities to move significantly more money into tax-advantaged accounts every single year while building wealth together for the future.
Once you have full-time employees who've been with you for at least a year, or qualifying part-time employees who've been with you long enough to meet the rules, you can no longer use a Solo 401(k). You can't just pretend those employees don't exist. That's when it's time to take a different path.
The good news is that your retirement planning doesn't stop. It simply evolves. Instead of a Solo 401(k), you should start looking at a Safe Harbor 401(k), sometimes called a group 401(k). Some business owners hear that and immediately think they're giving something up because the employer match isn't as generous as it can be with a Solo 401(k). That's the wrong way to look at it.
You can still make the large employee deferral, and that's where most of the contribution power comes from. The employer match may be smaller, but you're still able to put away a substantial amount of money every year while offering a valuable retirement benefit to your employees. Better yet, Safe Harbor 401(k) plans have become much more affordable over the past 20 years, making them an excellent option for growing businesses.
You may also hear people recommend a SEP IRA or SIMPLE IRA. Personally, they don't even make my list. I'm a little opinionated on this, but I'd rather recommend what I believe is the best strategy. As your business grows, your retirement plan should grow with it. Start with your Roth IRA, build on it with an HSA if you qualify, move into a Solo 401(k) when the time is right, and transition to a Safe Harbor 401(k) as your company grows. That's the roadmap I've been teaching entrepreneurs for years because it works.
One lesson I've learned after decades of working with entrepreneurs is that too many people obsess over today's tax deduction while ignoring tomorrow's wealth. Yes, taxes matter. I make my living helping people reduce taxes. But the goal isn't simply paying less tax this year. The goal is building enough wealth that taxes become a much smaller concern later.
That's why I spend so much time teaching Roth strategies, self-directing, and business ownership. When you combine smart tax planning with disciplined investing and consistent retirement contributions, you create options. And when you have options, you have freedom. That's ultimately what retirement planning is supposed to give you.
If you own a business, have a side hustle, or earn self-employment income, you have retirement planning opportunities that many employees simply don't have. The mistake is assuming retirement planning starts when you're older or that you need to figure everything out before taking the first step.
Start with the basics. Fund your Roth IRA every year. Invest in assets you understand. Take advantage of an HSA if you're eligible. As your business grows, graduate to a Solo 401(k), and eventually explore more advanced retirement plans as your company evolves. You don't build wealth by finding one perfect investment. You build wealth by consistently making smart decisions year after year and giving those decisions time to compound.
When you're ready to build a retirement strategy that gives you more control over your investments and more opportunities to create tax-free wealth, my team at Directed IRA can help. Book a free 15-minute call to discuss Roth IRAs, self-directed accounts, Solo 401(k)s, HSAs, and other retirement planning strategies designed specifically for business owners and investors.
The best retirement plan isn't the one with the fanciest name. It's the one you actually use, year after year, while your wealth quietly compounds in the background.