As a small-business owner, you’re probably used to handling a lot of responsibility—everything from drawing up detailed business plans to creating a budget. So it should come as no surprise that funding your retirement will likely fall on your shoulders.
But what type of retirement plan is the right fit for your business? There are several types to choose from and the options can be confusing. For example, some small-business retirement plans are better for sole proprietors, while others may be more appropriate for businesses with up to 100 employees.
To choose the right plan for your business, you need to understand the nuances of these plans and match them to your priorities (e.g., higher contributions or simpler administration).
Understanding the differences in the plan types is an important exercise. If you have been operating a plan that doesn’t match your business needs, you could be missing out on important tax benefits, or possibly making mistakes regarding employee contributions.
Why have a small-business retirement plan?
Here are a few very compelling reasons:
- Your plan not only helps secure your future—it may be the primary way your employees can help secure theirs.
- Offering a plan helps make your business competitive when it comes to attracting and keeping good employees.
- There are potential tax benefits to offering a plan, because plan contributions for the business owner are deductible as a business expense.
Consider your options
Small-business retirement plans may offer certain tax advantages, including:
- Tax-deferred growth potential, which allows contributions to grow without being reduced by current taxes
- The potential to deduct employer contributions as a business expense
- A tax credit of up to $500 for certain expenses incurred while starting and maintaining the plan each of the first three years, if this is your first time offering a plan
Choosing the right plan takes careful consideration
If you know what you are trying to accomplish with a retirement plan, it may be relatively straightforward to determine which plan is most appropriate for the business. For example, is ease of administration an important consideration? Is it critical that employees be able to contribute to the plan? Knowing what you want and need ahead of time is a key component, because each plan has its advantages and disadvantages.
Talk to Us
Small-business plans are relatively low cost and easy to administer. To make the most of this retirement savings opportunity—both for yourself and your employees—make sure it’s the right plan for your small business before you set one up. Call us today at (973) 218-2440 or fill out the form in the Contact Us section so we can contact you.