One of the best things about working for a small company is this thing called a SEP plan. In short, an employer that offers a SEP plan can contribute up to 25% of an employee's salary into a qualified retirement account.
Putting that into numbers, let's say I draw a salary of $100,000. With a SEP plan, my company can contribute an additional 25% of that amount ($25,000) into a qualified retirement account in my name. Unlike 401K plans I'm also immediately 100% vested.
By comparison, the best you can get with a small company that offers a SIMPLE IRA (or possibly even a 401K) is 3% matching, meaning that with your $100,000 salary you can contribute $3,000 to your retirement account, and your employer can contribute an additional $3,000.
In short, with the SEP plan your total yearly benefits with a $100,000 salary are $125,000 ($100,000 now, $25,000 in a retirement account) while the maximum you get with a SIMPLE plan is about $106,000. Cut it however you want to, that's $19,000 more per year with a SEP plan.
So, if your employer offers a SIMPLE plan, I'd suggest talking to them about a SEP plan. They don't have to contribute as much as 25% -- they can choose any percentage up to that amount -- and depending on how you count, anything over 3-6 percent is a benefit to you.
books by alvin
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