Small Business Retirement Plans

Your start-up business is going swimmingly, but you’re having trouble attracting employees to take it to the next level.  Perhaps the problem is you’re not really offering the best retirement package to get those enthusiastic new people on board.  There are several options when you’re considering a small business retirement plan so you need to decide which one works best for your company and your employees.

Your first option would be an SEP IRA, which can be set up by any business owner or self-employed individual for anyone who has worked for them for 3 of the past 5 years and although the employee cannot contribute directly, the employer can contribute up to 25% of earnings on their behalf.

Next up, there’s the SIMPLE IRA, for companies with fewer than 100 employees.  Here, the employer or employee can contribute up to $10,500 plus an extra 3% of their salary.  The only real disadvantage to this plan is that if you have a higher salary and would like to contribute more, you are not able to.

Then, of course, there’s the good old 401(k) plan.  So long as your company has more than 25 employees, the 401(k) may not be as expensive as you thought to set up.  The principal advantage of the 401(k) is that employers and employees can defer up to $15,500 of their salary (or $20,500 if you are over 50).