Choosing retirement plans for business owners: Today, business owners are a critical piece for the growth of our economy. They will continue to provide new innovations and venture out to other countries improving competitiveness in our global markets.
New businesses have become the backbone of our U.S growth. For this reason it is important to have support from our government, consumers and the business owners themselves.
One of the ways our business owners help support our economy is by providing jobs and retirement plans to help us plan for our future. However, choosing retirement plans, and the right one at that, for a business owner can be overwhelming and confusing. It takes hours of research and a check list of highly relevant questions to figure out the best plan for the type of business. Most of the facts include demographics of the employees such as their ages and income, along with the overall financial objective for the plan.
There are numerous plans to choose from such as: SEP’s, SIMPLEs, 401(k)’s, 403(b)’s, Solo 401(k)’s, Safe Harbor 401(k), Profit Sharing, Defined Benefit Plans, Money Purchase, and so on. In addition, add an array of non-qualified plans, and it becomes even more daunting.
For example, the SEP-IRA allows a contribution of up to 25% compensation with a limit of $49,000. It also is very easy to set up and has low administration cost. Whereas a traditional 401(k) is appropriate when a business seeks to make large contributions for the owner(s) and other partners, as well as provide an employer contribution for employees as a benefit.
The traditional 401(k) options have many benefits and allow the employer to control eligibility, match options and vest schedule. It also provides asset protection under ERISA and allows plan participants to contribute $16,500 for 2011 — plus an additional $5,500 if the participant is age 50 or older.
On the other hand, 401(k) plans may create high fiduciary responsibility for the business owner and have higher administration cost due to complex discrimination testing.
Choosing retirement plans for business is challenging, and I found that the process of elimination helps sift through the many choices; and clearly identifying what you want to achieve for you and your employee’s financial goals will narrow the choices.
As our economy continues to work though the recent recession, business owners will still provide new innovations in servicing and production of goods. We hope that as our economy stabilizes, we will see more opportunities for businesses to choose retirement plans and offer the right one to employees to help our future retirees.
For more information about choosing retirement plans, visit www.jacobgold.com.
Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.
This information was prepared by Michael Cochell of Jacob Gold & Associates Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.