Do you have a small business? Then, consider these retirement plan options to offer your employees!
If you run a small business, setting up a retirement plan for your employees is essential. I’m sure you know how expensive it can be to hire new employees, especially if they are new to the workforce or don’t have any experience in the field. It would be a shame if you had to let go of an employee because you couldn’t afford them anymore. But, on the other hand, you worked hard to establish your business, so you should keep it running by offering benefits to your employees. A small retirement plan can really help with this issue.
There are several types of plans you can set up for your employees depending on how much money you want to contribute per year, which ultimately depends on your business’s budget.
SIMPLIFIED EMPLOYEE PENSION (SEP) PLAN
A SEP is a qualified retirement plan that allows you to contribute a fixed percentage of your employees’ annual income. If your business is doing well financially, this could be an excellent way to attract new employees interested in getting benefits without costing too much money. You can give them a good percentage of what you contribute or save on yourself by choosing not to give your employees any of your SEP contributions. The decision is up to you.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES (SIMPLE) IRA
The SIMPLE IRA is for small business owners looking to contribute towards their employees’ retirement plans without too much complication. Only two types of contributions can be made through this plan: employer contributions and employee contributions. Both will help your employees prepare themselves for a financially secure retirement. This type of plan does not come with the same high contribution limits as the other plans, but it’s an excellent place to start if you’re looking for a small retirement plan.
TRADITIONAL 401(K)
The 401(k) plan is a traditional plan requiring employees not to pay income tax until they withdraw from their accounts. This is an excellent method for employees who are not comfortable paying taxes now. It’s also beneficial to employers because they won’t have to put as much money into the account, but their employees will still receive equal benefits. Employers know that it can be difficult for new businesses to attract experienced employees, so this plan will help them acquire top-notch employees by offering them this great retirement plan.
ROTH IRA
The Roth IRA is an excellent option for employees that want to get the most from their retirement plans. Since, unlike other traditional retirement options, your contributions will be after-tax dollars, you get to withdraw money from your account tax-free when you reach 59 and a half years of age. This freedom can help your employees plan their future expenses easily and even help them invest money for desired future goals.
SAFE HARBOR 401(K)
The Safe Harbor 401(k) is a plan similar to the standard 401(k), but it’s much easier to qualify for. This type of retirement plan may be beneficial to your business because there are much fewer administrative costs to maintain this type of account, and there aren’t as many requirements to follow when setting up a plan. Employees will also like this option because it’s not too complicated and the employers can help them better prepare for their future financially.
SOLO 401(K)
This version of the 401(k) plan is only available to business owners and their spouses, who are the only employees in their business. If you’re a small business owner looking for ways to save on your own retirement plan, this is an excellent option that won’t negatively affect your company’s bottom line. This retirement option is also called a Self-Employed 401(k), and either sole proprietors or freelancers can maintain it. Employees will want to keep in mind that this retirement plan is much more expensive than the other types, so you might want to consider setting up a Roth IRA or SIMPLE IRA instead.
Small business owners looking for a retirement plan for their employees should consider setting up one of these plans. Consulting with an accountant or tax lawyer first is highly recommended because these kinds of accountants are well-versed in the various pros and cons of each type of plan and any legal requirements that must be followed. As you can see from the information list above, there are many great benefits to setting up a retirement plan for your employees. If you’re looking for ways to attract and keep top-notch employees in your company, then this is an excellent place to start. Not only will it benefit both you and your employees now, but it’ll be beneficial to your employees in the long run as well.
