Though some small business owners think that they can’t really be responsible for their employee’s retirement, there are plans out there just right for the small business owner, so it is very doable.
These plans are specifically designed for the small business and by offering a retirement plan to your employees, you create a sense of loyalty and integrity that will benefit everyone, plus, you’re helping them prepare for their later years.
The most common type of retirement plans for small businesses are Simplified Employee Pension plans, Simple IRAs, and Simple 401(K) plans. Let’s take a look at some of the differences and which one could work best for you…
As the article, “SEP, SIMPLE or 401(k): Which Retirement Plan Is Best for Your Small Business?” looks at, take the time to review different plans to see which best fits your needs.
Among the options:
- Simplified Employee Pension plans – This plan is also knows as a SEP-IRA and is a good choice for small businesses, as well as the self-employed. The contribution limit is generous and is variable each year depending on what your business is bringing in. You’ll have to contribute to everyone’s plan, including yours. Employees cannot contribute to them;
- Simple IRA – In these retirement accounts, the employees can contribute to retirement. These accounts are vested, so if an employee leaves, he can take it with him. Because of the opportunity for the employee to invest, the contributions can be quite substantial. However, there is a cap on what they can contribute per year. If your company employs up to 100 people, this may be a good plan for you;
- Simple 401 (K) – This is basically a modified 401 (K) that small businesses can use. Both the employee and employer can contribute to the account. There are some caps on contributions depending on employee’s age.
All of these have low or no cost to set up and are fairly simple to administer.
These types of plans are also tax deductible so they provide that benefit to the employer. They won’t take up too much of your time or budget to get them going and maintain them.
Attaining and Retaining the Best Workers
Providing a retirement account to your employees will help you get the most qualified workers, as some may go elsewhere in order to find a retirement plan.
It shows that you value them and that you want them to be there; you’re taking a vested interest in not only their time with you, but also their well-being and later years.
About the Author: Heather Legg is an independent writer who covers topics related to small business, working from home and social media.