The New Optometry Practice Retirement Guide: Options Compared

2026-08-21

Compare retirement plan options for new optometry practices: 401(k), SEP IRA, SIMPLE IRA, defined benefit, and profit sharing. Costs, limits, and steps.

Retirement planning for a new optometry practice is not a distant concern. The decisions you make in your first few years can determine whether you retire with a comfortable nest egg or a shortfall. This guide compares the most common retirement plan options for optometry practices, with realistic 2026 figures and practical steps you can take this week.

Why Retirement Planning Matters for New Practices

As a practice owner, you do not have an employer-sponsored plan. You are the employer and the employee. The IRS limits how much you can contribute to tax-advantaged retirement accounts, and those limits are tied to your plan type. Choosing the right plan early can save you thousands in taxes each year and build wealth faster. The wrong choice can lock you into administrative costs or contribution limits that do not fit your cash flow.

The Main Retirement Plan Options

Here are the five most common retirement plans for optometry practices, compared by cost, contribution limits, and complexity.

1. Solo 401(k) (or Individual 401(k))

A Solo 401(k) is designed for practices with no employees other than the owner and a spouse. It allows you to contribute as both employee and employer.

Employee deferral: Up to $23,500 in 2026 (plus $7,500 catch-up if age 50 or older).
Employer profit sharing: Up to 25% of compensation, capped at a total of $70,000 (or $77,500 with catch-up).
Cost: $0 to $500 to set up, $0 to $100 per year for maintenance. Many brokers (Fidelity, Vanguard, Schwab) offer free Solo 401(k)s.
Complexity: Low. You can open one online in about 30 minutes.
Best for: Solo practitioners with no staff, or practices where the owner is the only eligible employee.

2. SEP IRA (Simplified Employee Pension)

A SEP IRA is a simple plan where the employer makes contributions to traditional IRAs for eligible employees. It is easy to set up and has high contribution limits.

Contribution limit: Up to 25% of compensation, capped at $70,000 in 2026.
Cost: $0 to $200 to set up, $0 to $100 per year. Many custodians charge nothing.
Complexity: Low. You can open a SEP IRA with any bank or brokerage.
Important: Contributions are made only by the employer. You cannot make employee deferrals. If you have employees, you must contribute the same percentage for all eligible employees (those 21 or older, with 3 years of service, earning at least $750 in 2026).
Best for: Practices with no employees or where the owner wants a simple, high-limit plan.

3. SIMPLE IRA (Savings Incentive Match Plan for Employees)

A SIMPLE IRA is designed for small businesses with 100 or fewer employees. It allows both employee deferrals and employer contributions.

Employee deferral: Up to $16,000 in 2026 (plus $3,500 catch-up if age 50+).
Employer contribution: Either a dollar-for-dollar match up to 3% of compensation, or a flat 2% of compensation for all eligible employees (regardless of whether they contribute).
Cost: $0 to $200 to set up, $0 to $100 per year.
Complexity: Low to moderate. You must file IRS Form 5304-SIMPLE or 5305-SIMPLE.
Best for: Practices with a few employees, especially if you want to offer a plan but keep costs low.

4. Defined Benefit Plan (Cash Balance Plan)

A defined benefit plan promises a specific benefit at retirement, funded by employer contributions. It allows the highest contribution limits, but it is complex and expensive to administer.

Contribution limit: Can exceed $300,000 per year, depending on age and compensation. For 2026, the annual benefit limit is $280,000 (or $310,000 for those age 60-63). Contributions are actuarially determined.
Cost: $2,000 to $5,000 to set up, $1,500 to $5,000 per year for actuarial and administrative fees.
Complexity: High. Requires annual actuarial certification and IRS filings.
Best for: High-earning owners (typically $300,000+ net income) who want to maximize tax-deferred savings and have stable cash flow.

A profit sharing plan allows the employer to contribute a discretionary percentage of profits to employee accounts. It is often combined with a 401(k) to create a “profit sharing 401(k)” plan.

Contribution limit: Same as Solo 401(k): employee deferral plus employer profit sharing, up to $70,000 total (or $77,500 with catch-up).
Cost: $500 to $2,000 to set up, $500 to $2,000 per year for administration, depending on the provider and number of participants.
Complexity: Moderate. Requires a plan document and annual nondiscrimination testing if you have non-highly compensated employees.
Best for: Practices with employees, where the owner wants flexibility in contributions.

Comparison Table

Plan Type	2026 Contribution Limit	Setup Cost	Annual Admin Cost	Complexity	Best For
Solo 401(k)	$70,000 (or $77,500 with catch-up)	$0-$500	$0-$100	Low	Solo owners
SEP IRA	25% of comp, up to $70,000	$0-$200	$0-$100	Low	No employees
SIMPLE IRA	$16,000 deferral + match	$0-$200	$0-$100	Low-Moderate	Small staff
Defined Benefit	$280,000+ (actuarially determined)	$2,000-$5,000	$1,500-$5,000	High	High earners
Profit Sharing 401(k)	$70,000 (or $77,500)	$500-$2,000	$500-$2,000	Moderate	Practices with staff

How to Choose the Right Plan for Your Practice

Follow these steps to select a plan that fits your situation.

Count your employees. If you have no employees other than yourself and your spouse, a Solo 401(k) or SEP IRA is likely best. If you have staff, you must consider their eligibility and contribution requirements.
Estimate your net income. Your contribution limit is based on your practice’s net profit (for self-employed) or your W-2 salary (if you are an S-corp). If your net income is under $100,000, a SIMPLE IRA may be more than enough. If you earn $300,000+, a defined benefit plan could save you significant taxes.
Assess your cash flow. Some plans require mandatory contributions (SEP, SIMPLE match). If your income fluctuates, a profit sharing plan with discretionary contributions offers flexibility.
Consider administrative burden. Solo 401(k) and SEP IRA are DIY-friendly. Defined benefit plans require a professional administrator. Factor in the cost and time.
Consult a tax professional. A CPA or enrolled agent can run the numbers for your specific situation. This is worth the $200-$500 fee.

Actionable Steps You Can Take This Week

Step 1: Determine your eligibility. List all employees and their hire dates, ages, and compensation. This will tell you which plans are viable.
Step 2: Compare providers. If you lean toward a Solo 401(k) or SEP IRA, research brokers like Fidelity, Vanguard, or Charles Schwab. Most offer free plans with no annual fees.
Step 3: Open a plan if you are ready. For a Solo 401(k), you can open one online in under an hour. You must open the plan by December 31 to make contributions for that tax year (though you can contribute up to the tax filing deadline).
Step 4: Set a contribution goal. Decide how much you want to save each year. A common target is 15% to 20% of your net income. Calculate the dollar amount and make sure your plan allows it.
Step 5: Schedule a meeting with a retirement planner or CPA. Even a one-hour consultation can clarify the best plan for your practice.

Frequently Asked Questions

Can I have both a Solo 401(k) and a SEP IRA?

Yes, but the total contributions across both plans cannot exceed the annual limit ($70,000 in 2026). However, it is usually simpler to choose one plan. If you have a Solo 401(k), you cannot also have a SEP IRA for the same business, but you could have a SEP IRA for a side business.

What if I hire my first employee mid-year?

If you hire an employee, your Solo 401(k) may become invalid if the employee is eligible. You would need to switch to a regular 401(k) or SIMPLE IRA. Eligibility rules vary by plan, so check with your provider. For a SEP IRA, you must contribute the same percentage for all eligible employees, which can be costly.

How much should I contribute to my retirement plan as a new practice owner?

Aim for at least 10% to 15% of your net income, but more if you can. The maximum is $70,000 per year (or higher with a defined benefit plan). Start with a percentage that feels comfortable and increase it as your practice grows.

What happens if I miss the deadline to open a plan?

You can still open a SEP IRA or Solo 401(k) by the tax filing deadline (usually April 15, plus extensions) and make contributions for the previous year. SIMPLE IRAs must be opened by October 1 of the tax year. Defined benefit plans must be established by December 31.

The Bottom Line

Your retirement plan is one of the most powerful financial tools in your practice. For most new optometry practices, a Solo 401(k) or SEP IRA offers the best balance of low cost, high limits, and simplicity. If you have employees, a SIMPLE IRA or profit sharing 401(k) may be necessary. Defined benefit plans are for high earners with stable income. Review your situation, take the steps above, and consult a professional to make the right choice. Starting early, even with modest contributions, can compound into significant savings by retirement.