The Tax Deferral Window Business Owners in Their 60s Need to Know About
Time Is Running Out
If you’re a business owner in your 60s, the tax clock is ticking.
There’s a short window to save a lot on taxes before you retire or sell your business. It’s one of the last big plays you can run—and most people don’t even know it’s there.
Missing this window means missing hundreds of thousands of dollars in potential savings. That’s not just tax money. That’s money you could’ve used to fund your retirement, help your kids, or grow your investments.
The $500K (or $1M) Strategy
Here’s the deal. Business owners over 50 can put large amounts into retirement accounts—pre-tax. In 2025, the IRS lets you contribute:
- $69,000 total per person into a 401(k) plan if you include the catch-up and employer contributions.
- If you’re self-employed or own a business with your spouse, you can double that.
With the right plan setup (like a solo 401(k) or defined benefit plan), you can defer $500,000 or more in income. And if your spouse is involved in the business too? That number jumps to $1 million.
This is legal. Smart. And temporary.
Once you stop working, or sell the business, that opportunity disappears. You won’t be able to shield income like that again.
Why Most People Miss It
Because they wait too long.
Jessica Jung, a CERTIFIED FINANCIAL PLANNER® who works with business owners in California and Tennessee, explained how one client came to her at 66 with a company he was ready to sell. He had no plan, no retirement setup, and was about to take a $1.2 million payout—all taxable at once.
She helped him pause, delay the deal, and build out a qualified plan with back contributions. He ended up saving more than $350,000 in taxes.
But it was close. A few months later and the sale would’ve locked it all in.
Qualified Plans: The Tools You Need
You don’t need a fancy structure or a 20-person firm to make this work. You just need the right type of retirement plan.
Here are the most common options:
Solo 401(k)
Good if you’re self-employed or work with your spouse. High contribution limits. Easy to manage.
- 2025 contribution limit: $69,000 if over 50
- Both you and your spouse can have one
SEP IRA
Simple to set up. Used mostly for small business owners with no or few employees.
- 2025 limit: Up to 25% of compensation, maxing at $69,000
- No Roth option
- No catch-up for over 50
Defined Benefit Plan
Best for high-income earners in their late 50s or 60s.
- Can contribute $100K to $300K+ per year
- Requires actuarial setup and ongoing maintenance
- Ideal for short time frames and large tax sheltering
Know Your Deadline
Tax deferral works best before the exit.
Once you sell your business or stop paying yourself a salary, you can’t make contributions. That’s why planning a few years ahead is so important.
If you’re planning to sell at age 65, your tax planning needs to start at 62—maybe earlier.
Think of it like packing before a long trip. You can’t start after the flight has taken off.
Don’t Forget Your Spouse
If your spouse works in the business—even part-time—they count. And that’s a huge opportunity.
Let’s say you each earn $150K in salary from the business. With two Solo 401(k)s, you could defer almost $140,000 combined per year.
Over three years, that’s over $400,000 in tax-deferred savings. That’s real money. And it compounds fast.
Tax Savings Aren’t Just for the Ultra-Rich
A lot of people think these strategies are only for people with millions already saved. That’s false.
If you own an S-corp, an LLC, or even a consulting firm, you can set this up. You just need:
- Reported income
- A retirement account
- A few years left in the business
The biggest mistake people make is waiting until they’re ready to exit. At that point, it’s usually too late.
Action Steps You Can Take Today
Here’s what to do now if you’re in your 60s and own a business:
1. Check Your Income Structure
Make sure you’re paying yourself a reasonable salary. You can’t contribute to these plans without W-2 income or earned income.
2. Meet With a Tax Pro or CFP®
Ask them about high-limit deferral options. Bring up Solo 401(k)s and Defined Benefit Plans. If they say “just stick with an IRA,” you need a second opinion.
3. Start the Clock
These plans take time to set up. If you want 2025 tax benefits, get everything going by the fall. That gives you time to contribute before year-end.
4. Run the Numbers
Ask for a projection. How much can you contribute? What’s the tax savings? What happens if you add your spouse?
Put it in writing and track the impact.
Exit on Your Terms
Selling a business or retiring is a big deal. It should be a win—not a tax hit.
By using these tax deferral tools now, you take control of the timing. You keep more of what you earned. You get to decide how your story ends.
Don’t wait until the end to get smart. Get smart now. While the window’s still open.
The post The Tax Deferral Window Business Owners in Their 60s Need to Know About appeared first on Entrepreneurship Life.
