Getting a small business up and running is its own challenge, and no matter how much you love your business you won’t be able to keep it up forever. Eventually, you’ll want to retire, and even if you only have a few employees it’s likely they will want to retire too. So, as a small business owner what can you offer your employees and yourself to move them closer to retirement?
- 401K – While a 401K option is usually thought of in terms of something offered by large corporations, you can set up a 401K plan as part of your small business. Many people hear 401K and think that the employer has to match contributions, but that isn’t the case. If you can afford a match, great, if not it still gives employees a way to make regular contributions totalling up to $16,500 for those under 50 years, and $22,000 for those over 50. 401Ks come in both the regular and Roth varieties, letting you decide whether it is best for you to be taxed up-front with a Roth 401K or later on with a regular 401(k). 401(k)s are also good in case of an emergency, since loans are available in a pinch. Of course, there are tax implications, and plenty of paperwork to file with the IRS.
- SEP- SEP (Simplified Employee Pensions) IRAs are a good choice for many small businesses because they are relatively easy to manage. For these plans, employees do not contribute to the plan and contribution limits are around the same amount as they are for a 401(k). Unless you are able to make large contributions, employees may want to set up a separate IRA of their own, but it’s something that gets the ball rolling in the right direction. With a SEP there is less of a safety net before that retirement day actually comes. No loans, early withdrawals, or catch up contributions are allowed, but there are also fewer IRS regulations to worry about, which can be a big relief to a lot of small business owners.
- SIMPLE IRA – Just because the name says “simple” doesn’t mean that it is, but the SIMPLE IRA isn’t rocket science either. SIMPLE stands for Savings Insentive Match for Employees. In this plan, employers are required to match contributions, although those contributions are far less than 401(k) or SEP options, only $11,500 is allowed for a SIMPLE IRA. There are also fewer reporting requirements with the SIMPLE IRA as well.
Of course, whatever you choose to offer by way of retirement plans for your employees or for yourself will depend a lot on the state of your business, what you can afford, and how much you are willing to invest in your employees future.
[View Article List] [Go Back]
TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.