Retirement Planning 101 for Business Owners
As a business owner, retirement planning may not be a primary focus when dealing with your day-to-day operations, but it can be an extremely compelling component of your benefits package. Both your business and your employees can't afford not to plan, so it's important to take it into consideration. Consider the types of retirement plan options available, how to get started, and plan maintenance options available.
Consider What You and Your Employees Want in a Retirement Plan
There are many types of retirement plans that your business could offer, and choosing the best retirement option is important. Some questions to ask as you start considering your options include:
- Do I want a plan that's based off of company profits?
- Can I contribute to my employees' plans?
- Will all employees receive a retirement plan, or will it be reserved for key employees?
- Will I package a retirement plan with other options such as long-term disability?
Common Types of Retirement Plans
Two of the most popular retirement plans include:
- 401(k) plan: A retirement plan sponsored by an employer. Participants contribute a portion of their paycheck into selected investment options. Taxes on the money invested in a 401(k) aren't taken out until the money is withdrawn from the account. As the employer, you make contributions to an employee's account and choose a vesting period -- a duration of time where employees can't access your payments until they've worked for the company for a defined period of time.
- Profit sharing plan: A retirement plan where the employer decides when and how much the company pays into the retirement plan. This plan is catered toward the business that wants to reward employees based on pay grade.
Opportunities with Retirement Plans
Are you looking to earn top-notch talent through the benefits your company offers? Retirement plans are a strong incentive to retain and attract quality job candidates. Of course, retirement plans are beneficial for employees and business owners alike. According to the Department of Labor, small businesses can get a tax credit equal to 50 percent of the cost to set up and administer the plan (The credit maximum is $500 per year for each of the first 3 years of the plan).
Third-party sources that can take on fiduciary responsibility of your plan can alleviate the burden of managing a retirement plan on your own. You can seek council, get assistance with plan administration, and find investment advisement and management. The aforementioned tax credit and third-party assistance are the helping hands to get your retirement plan up and rolling.
Get Started with a Retirement Plan Talk to your financial advisor if you're ready to take the next step with a retirement plan at your business. You may also want to seek council from a plan provider, who can walk you through the various plans available and help you identify the best option for your business.