small business retirement plans
You’ve worked hard and took a risk to establish and run your business, now reward yourself with a business tax deduction and tax-advantaged savings for your retirement and the retirement of your employees with a small business retirement plan. Starting a retirement savings plan is easier than most business owners think. Low-cost plans that are simple to set up and maintain might be the best fit for your business or you may want a full service plan, such as a 401(k), that will provide you and your employees the added options and benefits of a full-feature retirement plan.
People tend to think of an IRA as something individuals establish on their own, while this is true, an employer can establish their own business’ IRA, too. Business can also help their employees set up and fund their own personal IRAs as an incentive to get their employees saving for retirement. The two most popular business IRAs are the SEP-IRA and the SIMPLE IRA. Plus, there is a payroll deduction IRA that is completely separate from the employer.
SEP-IRAs are appropriate if only the employer wants to contribute to the plan because these plans do not allow for employee contributions. These plans offer business owners maximum flexibility for contributions providing the ability to scale contributions based on employee wages and to change contribution amounts depending on business conditions. Minimal paperwork is required to set up a SEP-IRA.
SIMPLE IRAs are great for employers who want an easy to set up plan that allows for both employer and employee contributions. SIMPLE IRAs offer many of the same features and benefits of 401(k)s, but with limited employer matching contribution requirements. These plans are suitable for businesses with 100 or fewer employees that want to maximize employee contributions. SIMPLE IRAs are easier to set up to but offer a higher contribution limits than personal IRAs (Traditional and Roth).
Payroll Deduction IRAs are great for companies that want to help their employees save for retirement, but don't want to or can't handle the employer obligations that come with SEP and SIMPLE IRAs. Simply put the employer brings us in to help the employees set up their own personal IRAs and to choose the most appropriate investment options and that's it. The employer has no responsibility, obligations, or duties to their employee's IRA.
401(k) plans offer more features and benefits than SEP and SIMPLE IRAs, but these added benefits come with additional administrative costs. However, 401(k) plans can be the better retirement plan choice for larger companies as they have higher contribution limits, a more employer favorable vesting schedule, and the ability to tack on a profit-sharing element to it and for participants to take loans from the plan.
Solo 401(k) plans are only available for single employee businesses (or a business which also employs the owner’s spouse). These plans are great because you can put away a lot of money, but still keep your 401(k) plan costs down because it is for a single employee.
For most small business owners there is a retirement plan fit for your needs. Your plan will allow you additional tax-advantaged savings outside of your personal retirement plan, a means to help you and your employees save for the future, and an incentive to attract and retain talented individuals to help your business grow and prosper.
Pensinger Financial can be your trusted advisor to guide you through choosing the right plan, setting up the plan, and continued monitoring of the plan. This process is not a one-time deal; we will develop an ongoing and open relationship with you as you conduct and grow your business. We will handle your small business retirement plan needs and financially guide you and your employees to properly grow your money into and during retirement. Pensinger Financial will also act as the personal advisor to your plan’s participants to answer any questions they may have and to help them choose the proper investments. Also, your employees will have direct access to us; they will not have to go through you to speak with us.
If you are interested in discussing these plans in more details, have any further questions, or want to set up the best plan for your business please contact us here.