Did Your S Corp Switch Just Shrink Your Retirement?

In this month's episode of Beyond the Advisor, Nina Breen, CFP®, RICP®, CPWA®, Senior Wealth Planner, and Micah Alsobrook, CPFA®, MBA, Retirement Plan Advisor, walk through a hypothetical case study of two 50/50 business owners who switched their LLC to an S corp — and the retirement plan consequences that decision created. Micah breaks down how the payroll tax savings work, why a lower W-2 salary can quietly reduce what an owner is allowed to contribute to a SEP IRA, and how a 401(k) can change the math entirely. Nina and Micah run the numbers side by side across three scenarios, then cover the admin costs, cash flow requirements, and S corp restrictions that belong in the conversation before anyone makes the move.Key Topics Include:How S corp structure creates payroll tax savings versus an LLC or partnershipWhy a lower reasonable W-2 salary can reduce SEP IRA contribution capacitySEP IRA versus solo 401(k) versus traditional 401(k) — limits, deferrals, and flexibilitySetting a reasonable salary that balances tax savings with retirement savingsThe admin side: payroll vendors, filings, record keepers, TPAs, and advisor costsRunning a side-by-side analysis before making a structural changeHypothetical case study: three scenarios comparedWhen an S corp does not make sense — windfall years and unstable cash flowS corp restrictions: shareholder limits, one class of stock, and pro-rata distributionsWhy the decision requires a team: financial advisor, CPA, and attorney