You don’t need to spend a ton of money to set up a retirement plan for you and your employees. Yes, you have more immediate financial concerns – from payroll to health care costs – but providing a retirement plan for everyone is crucial, according to Shoreline Financial Advisors and other financial planners. For one, you could attract and retain more and better employees. The tax benefits are also excellent. Below are some of the most basic retirement plans you could consider.
Which retirement plan?
Among the most common retirement plans is payroll deduction because employers will not have to spend anything. It’s up to your employees to choose how much they would like to set aside each month to go to their retirement savings, and all you have to do is deposit it to their Individual Retirement Arrangement or IRA. Employees older than 50 years old could make catch-up or additional contributions yearly.
Another common retirement fund for small businesses is the Simplified Employee Pension Plan or SEP. With this retirement savings model, you could contribute up to 25% of the compensation of an employee into their IRA. Paperwork and administration are also easy so you will not have to worry about that. Your employees will not have to contribute anything.
You could likewise choose to go with the Savings Incentive Match for Employees or SIMPLE IRA. This retirement fund model combines’ employer contributions and payroll deductions. You could opt to make an annual 100% match on an employee’s compensation first 3% or across the board contributions amounting to 2% of their compensation into their IRAs.
Lastly, you could set up a traditional 401(k), so your employees could defer their pretax earnings. As for you, you have the option of matching their contributions or not.
The bottom line
Providing your employees, and of course, yourself, a solid way to prepare for retirement does not have to be costly. This way, your employees would be more secure in their current positions, making them more productive, which, in turn, would benefit your business. What’s more, you will be able to take advantage of tax deductions if you choose to make contributions – a win-win for everyone.