Money Minute: Business Retirement Plan Design

Money Minute: Business Retirement Plan Design

Now that you have your business up and running, it is time to start considering which retirement vehicle might be an appropriate fit for your company.

There are many considerations when deciding the correct retirement plan for you.  Do you have a large number of employees who will be proactive about saving for their future?  Does your company have a small number of employees who you would like to share profits with, all while benefiting from a business tax deduction?

Navigating through the alphabet soup of retirement plan names can be overwhelming.  You need to weigh the positives and negatives of plans such as SEP-IRA, SIMPLE IRA, 401(k), Profit Sharing, and Defined Benefit Plans.

Here are some characteristics of these 5 plans:

  1. SEP-IRA
  • Easy to set up and maintain
  • No initial setup or annual maintenance fee
  • Employer contributions only
  • Designed for companies with fewer than 100 employees that do not have other retirement plans
  • Salary reduction plan with less administration fees
  • Employer and employee contribution options
  1. 401(k)
  • Designed for any business with one or more employee
  • Employer can match employee contributions
  • Employer and employee contribution options
  1. Profit Sharing
  • Employer sponsored
  • Employer contributions only
  • Company decides how much and when to contribute
  1. Defined Benefit Plans
  • Employer sponsored
  • Employer provides a fixed, pre-established benefit for employees
  • Benefits cannot be retroactively decreased

Once you decide upon the type of plan, you will need to choose the specifications of the plan.  These can include Roth options, loan provisions, hardship distributions, annuity options and so on.

Putting together the correct retirement plan will not only benefit your employees, but you as a business owner as well.  Your investment professionals at SVA Plumb Wealth Management are ready to help you with this important decision.

Article Topic Expert: Keith Kuzera

Keith is a Wealth Manager with SVA Plumb Wealth, LLC.

With more than nine years in the financial industry, Keith provides comprehensive financial planning to his clients as well as asset management, investment analysis and social security planning. He conducts educational meetings for plan participants in qualified retirement plans.

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