Retirement Planning for Business

One of the more difficult responsibilities of being a business owner is managing a retirement plan for yourself and your employees. In fact, many business owners neglect or forego it all together. The daunting task of choosing the plan that best fits your needs, managing contributions and understanding IRS tax codes can be overwhelming. Some things you should know about the world of employer sponsored retirement plans include:

Retirement is Not a One Size Fits All Approach

While one of the more commonly used plan types, a 401(k) may not be the best fit for you and your employees. There are many other options, such as, SEP and Simple IRAs, Solo and Roth 401(k)s, etc. Each with their own income barriers, contribution limits, tax benefits and flexibility for employee participation requirements.

Contributions to Retirement Plans can have Tax Benefits in the Year They are Made

Contributing to an employer sponsored retirement plan allows you to both provide your employees with added benefit, while removing a portion of your taxable income, lowering your tax liabilities.

You Do Not Have to Do it Alone

Although many business owners act as their own Plan Administrators for their retirement plan, there are Third Party Administrators out there who are well versed with the intricacies of running various plans. They can navigate the, sometimes, confusing paperwork required to create your plan, as well as, serve the growing needs of your participants. There are many dates, such as, contribution deadlines and Plan Restatement* that must be followed.

*The Pension Protection Act is public legislation that was enacted to protect  retirement accounts and to hold companies that have underfunded existing pension accounts accountable. In 2006, the President signed an amendment to the original  PPA in an effort to reform the pension system. The Pension Protection Act requires that all Qualified Retirement Plans restate the plan once every 6 years, starting in 2009/2010, among other legislation. After the most recent plan restatement, many plans are left out of compliance and in danger of losing their tax-sheltered status.

You are Not Limited as to Growth

Retirement plans offer a way for you to grow your money on a tax deferred basis. This means that while you are putting away money, your investment can grow without being taxed immediately. Ideally, taxes will be levied as you withdraw from the plan in retirement, when your tax bracket is lower.

This is where a Registered Financial Advisor can come in. As a business owner, you are already wearing many hats. Portfolio management does not have to be one of them.