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The Right Retirement Plan for Your Business
Small Business Owners

Business owners wear a number of hats, and keeping the day to day operations up and running in the most cost effective and efficient way can mean long-range objectives are set to the side. Saving for retirement is generally on the list of goals that are put off, even though it is one of the most important goals for the future.

As a business owner, you have a number of options for saving toward retirement, but selecting the right retirement plan for your business can be a daunting task. It is, however, a necessary part of business ownership no matter how big or small your company may be. To help you make the best decision for your business, let's take a look at the retirement options available to you.

SEP IRA                 

A SEP IRA is a popular choice among business owners because it allows for flexibility each year and high contribution limits. With this option, each employee can establish a SEP IRA and a uniform percentage of compensation is contributed for each eligible account. Contributions cannot exceed 25% of total wages or $53,000, whichever is less, and can vary each year depending on your business needs and expenses. SEP IRAs are easy to establish and affordable to maintain.


A SIMPLE IRA is an option for companies with 1 – 100 employees, and is best suited for those who want to contribute yearly. Employees under a SIMPLE IRA plan can make pre-tax contributions up to $12,500 each year, and employer contributions are required at either a fixed rate of 2% or a match of 3%. Like SEP IRAs, SIMPLE IRAs do not require much to establish, nor are they expensive to administer.

Profit-sharing Plan

Another flexible option for retirement savings is a profit-sharing plan, which allows you as the business owner to make contributions based on company profitability. Eligible participants in a profit-sharing plan receive contributions as well as any investment losses or gains based on an actuarial formula created within the plan document, and total contributions cannot be greater than 100% of compensation or $53,000, whichever is less. These plans are more complex to establish and are costly to administer and monitor.


A 401(k) plan provides participants a range of investment options, pre- or post-tax contribution as well as a set match from the company each year. In order to remain compliant with ERISA guidelines, a 401(k) match must either be 100% up to 3% and then 50% from 3% - 5%, or a set 3% matching contribution. Participants can contribute up to $18,000 for the current tax year and the combined total of all contributions cannot exceed 100% of compensation or $53,000, whichever is less. These plans can take time to establish and can be somewhat costly to maintain.

There are a number of retirement plans available and each provides a tax deduction for contributions as well as tax deferral until withdrawals are made during retirement. As a business owner, selecting the right retirement plan is as simple as understanding your options and then choosing which strategy is best suited for you and your business.


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