The Best Retirement Plan Options for Small Business Owners
In a highly competitive job market, potential employees look for businesses that offer the benefits they want. However, for small business owners, it can be a challenge to find economical options that are attractive to both the employer and employee.
If you’re a small business owner looking to offer retirement plans to your employees, here’s what you need to know about your options.
Retirement Plan Options for Small Business Owners
1. Traditional 401(k)
This is the most common retirement plan option – popular with both employers and employees. There are a wide number of plan providers to choose from, including some that specialize in small businesses.
What to know about this plan:
Choose this option if:?you are an established small business that anticipates future growth.
A 401(k) can be a bit costly to set up, but it is very appealing for employees. The flexibility offered in terms of contribution and matching make it easy to customize to your businesses needs. However, this plan is not ideal for new businesses or businesses where revenue fluctuates highly from year to year.
2. SIMPLE IRA
A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a popular retirement plan option for small businesses. It gives employees the option to contribute more toward their retirement vs creating an individual IRA account, but it’s typically lower cost to employers than a 401(k).
What to know about this plan:
Choose this option if:?you are an established small business but can’t afford the higher cost and contribution amounts of a 401(k).
A SIMPLE IRA allows employees to contribute more money toward their accounts with less expense to the employer than a traditional 401(k). This option is still appealing to employees. For businesses who want to offer a retirement plan but aren’t quite ready for the cost of a 401(k) OR whose employees want to contribute more money toward their retirement, this is an attractive option.
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3. SEP IRA
A Simplified Employee Pension, or SEP IRA, is the most inexpensive retirement plan option for employers. It does not allow employees to contribute, but it still offers some retirement funding.
What to know about this plan:
Choose this option if:?you need something low-cost and/or if your revenue fluctuates from year to year.
A SEP IRA is a fantastic way to still offer retirement benefits, but without the higher employer cost of other options. The flexibility of contributions works well for businesses that are new and/or have fluctuating revenue from year to year. During low revenue years, employers can halt contributions and then provide more contributions during high-revnue years.
These are the best retirement plan options for small business owners, but the question of which plan is best for?your business?is one that’s harder to answer. Typically, you’ll need to work with?an expert that specializes in benefits planning for small businesses?to identify the ideal plan type and help you choose the right provider.
Retirement and Benefits Planning Services with Greater Midwest Financial Group
Planning for Business Owners/Executives
For business owners, benefits planning requires additional considerations and paperwork.
Work with an advisor and get answers to your biggest executive benefit questions:
Benefits Planning for Individuals
We also offer advice for your employees. They can receive support with choosing these benefits and more: