Company Retirement Plans

November 27, 2013

It is hard enough finding, not to mention the expense of training, good employees these days. So, why risk losing them to another employer just because you lack a good retirement plan? Many companies are learning it may be a smart business decision to offer a retirement plan. The plans are potentially a good deal for your employees and the tax advantages you may enjoy could be helpful for your company. Business owners have many options regarding setting up a retirement plan. You can set up a SEP IRA, SIMPLE IRA, 401(k) plan, profit sharing plan, defined benefit plan or a single 401(k). The list goes on and on.

Most business owners start with the SEP IRA. With the SEP IRA< you are able to put up to 25% of your net income away and that amount is completely deductible for you. You could also do a single 401(k), which is just like a SEP IRA but allows you to take out a loan for up to 50% of the balance in the 401(k). Remember, taking a loan on your 401(k) is not the best option but sometimes the only. If you have employes that have been with you for 2 of the last 5 years, you could also look at a SIMPLE IRA. With the plan, you are able to put $11,500 away and if you are over 50, you can put $14,000 away. Keep in mind that the earnings portion of withdrawals will be taxed as ordinary income. Withdrawals prior to age 50 1/2 may also be subject to a 10% IRS penalty.

There also is the option of a defined benefit plan. Defined benefit plans are great for those employers that have a few highly compensated employees (such as a law firm, doctor or dental clinic) and the rest of the workforce is not.

If your company is rapidly growing and expanding, you could have a 401(k) plan. When you have a 401(k) plan you generally add more cost but could also add more liability. Getting a proposal and having an independent Financial Advisor look at your current retirement plan and all your options can help you make the best decision.

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