3 Common Retirement Plan Mistakes to Avoid

Starting a company retirement plan is a smart move, but it’s easy to make costly mistakes early on. We’ve worked with many business owners who’ve said, “I wish I’d known this sooner.” Here are three common retirement plan mistakes to avoid when setting up your business’s retirement plan. ¹

1. Choosing the Wrong Type of Retirement Plan

Not all retirement plans are created equal. Whether it’s a 401(k), SEP IRA, or SIMPLE IRA, the plan you choose can impact how much you and your team can save—and how much you’ll owe in taxes.
While SEP and SIMPLE IRAs may seem easier to set up, many business owners regret choosing them. A 401(k) typically offers more flexibility, higher contribution limits, and better tax advantages.

SEP IRA Drawbacks:

• Employer-only contributions: You must contribute the same percentage for all eligible employees, which can be expensive.
• No employee contributions: Your team can’t add their own money.
• All employees must be included: Even part-time and seasonal workers.
• Immediate vesting: Employees own 100% of contributions right away.

SIMPLE IRA Drawbacks:

• Low contribution limits: Just $16,500 in 2025—much lower than a 401(k).
• Required employer contributions: Either a 3% match or 2% across the board.
• All employees must be included: Including part-time and seasonal.
• Immediate vesting: No retention incentive.

Hard to upgrade: SIMPLE IRAs have strict rules for switching to a 401(k), which can trap you in a plan that no longer fits.
Before choosing a plan, understand the trade-offs. A 401(k) may be more work upfront, but it often pays off in the long run.

2. Not Hiring a Specialized Advisor

You’ve got options when it comes to hiring a retirement plan advisor—but not all advisors are the same.

No Advisor

Going it alone might seem cost-effective, but you’re responsible for everything—from investment selection to compliance. That can lead to costly mistakes, missed opportunities and increased fiduciary liability

Non-Specialist Advisor

Some financial advisors offer retirement plan services, but if they don’t specialize in them, they may not have the expertise to guide you through plan design, compliance, or fiduciary duties.

Retirement Plan Specialist

This is where things get easier—and smarter. A retirement plan specialist focuses specifically on helping businesses like yours set up and manage retirement plans. They can:

• Help you choose the right plan type (like a 401(k) vs. SEP or SIMPLE IRA)
• Offer access to better investment options
• Reduce your administrative burden
• Keep you compliant and mitigate fiduciary liability

3. Waiting Too Long to Start

One of the biggest mistakes?  Delaying your 401(k) plan. Every year you wait, you and your employees miss out on valuable savings and tax benefits.
IRS Start-Up Tax Credit
The IRS offers a 401(k) start-up tax credit worth up to $16,500 over three years. This is a dollar-for-dollar credit, not just a deduction.
Here’s how it breaks down:

• You get the greater of $500 OR $250 per eligible non-highly compensated employee (NHCE) each year.
• The credit maxes out at $5,000 per year, or 50% of plan costs.
• Add automatic enrollment and get an extra $500 per year for three years.

Let’s Talk

We’re here to help you navigate the ins and outs of 401(k) plans and retirement savings. Whether you’re just getting started or looking to upgrade your current plan, we can help you find the right fit. Contact us to get started today.

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