Hi, I’m Matthew Morrow. As a business owner you decided you want to have a retirement plan. Now, you’re asking the question: which plan is right for me and for my business? There are several options for retirement plans, and you can tailor the right plan for your personal situation, your company’s, and your employees. There are a few questions that you should be asking yourself as you determine the right retirement plan.
Q. How Much to Contribute on Your Own Behalf?
First, how much you with the owner want to contribute toward your own retirement? Plans have varying levels of contribution limits and this is an important question to ask first when determining the plan for your company.
Q. How Much to Contribute on Your Employees’ Behalf?
Secondly how much you want to contribute on behalf of your employees? Some plans offer no matching contributions from the company, while other plans are entirely funded by employer-matching profit-sharing contributions.
Q. How Easy is the Plan to Administer?
Lastly, how easy is the plan to administer? How expensive is the plan? Costs are important! There are plans that can be structured to have no cost to the business. These are also very easy to administer plans while still allowing employees to make contributions, and to allow you as employer to make contributions on behalf of your employees.
Simple and Effective Retirement Plan Options
Several options exist. Starting with the lowest cost plans, the easiest to administer plans, such as a Payroll Deducted IRA Plan. This is as simple as employees being allowed to contribute towards their retirement through their payroll, expecting no employer matching and no cost to the employer to administer the plan. You can set up a simple IRA: it’s in the name there. It’s easy to administer, there’s no cost the company, and typically you can work one vendor to make all of your contributions.
As you get more complicated or want to add additional features, begin to look at 401(k) plans, 403(b) plans, as well as SEP IRA, Profit-Sharing plans. These plans allow for many more features, such as loaning, as well as complex employer-matching programs, profit-sharing programs, hardship withdrawals and many other features that might be important to you as the owner or to your employees. Again, depending on the features retirement plan can be tailored to your needs.
But ask those important questions as you begin reviewing retirement plans:
- How much do I want to save into the plan on my own behalf?
- How much am I willing as a business owner to contribute on my employee’s behalf?
- How important are costs and the ease of administration to me as I develop my plan?