Choosing A Retirement Plan For Your Business
When choosing a retirement plan for your business, there are several options and factors to consider. This article is meant to give you a general overview of those options to get you started in selecting a plan that benefits you and your employees.
One of the first things to consider is the size of your company. The number of employees will help steer you when selecting a plan.
Another thing to consider is your motivation as the employer. What do you want to accomplish? A motivating factor may be employee retention and appreciation. Another motivator may be sheltering money for yourself.
When we meet to discuss your options, we will talk about these goals and motivating factors.
Types of Plans
A 401K is typically a good option for companies with 25 or more employees. A 401K requires an outside administrator to monitor it and report to the IRS to ensure it is in compliance. Those costs can start at around $1,500 to $1,800 per year. Benefits include tax-deductible contributions, tax-deferred earnings, flexible contribution requirements and investment options.
An individual 401K is an option for a person, and their spouse if they work together. Each person can contribute up to $18,500 per year. The company can contribute 25% of their salary. This can add up to a large amount that can be sheltered from taxes.
Individual retirement accounts (IRAs) are another way to invest, often with pre-tax dollars, so that any growth in the account is tax-free until it is withdrawn. Clients can invest in stocks, bonds, mutual funds, certificates of deposit (CDs) and other alternatives, with those investments reported on one statement.
A savings incentive match plan for employees (SIMPLE) IRA is an IRA-based plan that gives small employers a way to make contributions toward their employees’ retirement. The earnings in the account are tax deferred until withdrawal.
A simplified employee pension (SEP) plan is an employee-sponsored, tax-favored retirement plan, which is another option for small businesses. Unlike a traditional qualified plan, a SEP doesn’t involve an extensive written plan document and has minimal compliance reporting and disclosure requirements.
There is a lot more to consider when selecting a plan that is right for your business. To dive deeper into this process, schedule a time to meet with a Forge Financial representative who can further discuss your options.