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Choose Right Small Business Retirement Plans for You

Even of the small majority, an additional than were the only ones actually making efforts. 401(k) efforts are doing no better, with just 20% taking part. If you’re a business proprietor, you almost certainly know much better than anyone how difficult it is to create aside a set amount every time, but something is preferable to almost nothing. NextWave Wealth provides financial planning services to busy professionals and entrepreneurs. Small Business Retirement Plans, You’re making money, and for many of you, taking care of your family. Now is the time to get organized and start making the most out of the financial resources you have coming in. The challenge is juggling the need to save for your future while still handling your current obligations, all the while still taking the time to enjoy the fruits of your labor today. Here are some ventures options you can utilize to plan an appropriate retirement:

  1. SEP IRAs

A SEP IRA is a kind of retirement plan that may be set up by employers, partnerships, only proprietorships, freelancers and self-employed individuals. Contributions can only be made by the employer and are tax-deductible. Owner-employees contribute as both the employer and employee.

  • SEP IRAs are ideal for businesses without any employees or very few employees.
  • Contribution Limits – The contribution limit for a SEP IRA account is 25% of the salary drawn, limited to a maximum of $52,000 and $53,000 in total contributions for 2014 and 2015 respectively.

Note – This IRA is rather easy to determine, inexpensive to administer and provided by most online brokering companies, benefits consultants, and other major financial institutions.

  1. Simple IRAs

Just like the SEP IRA, a straightforward IRA retirement plan may also be set up by companies, partnerships, self, freelancers and sole proprietorships-employed individuals. Eligible employees can contribute some of their pretax income to the plan. This implies taxes on purchases are deferred till enough time they may be distributed.

  • Simple IRAs are ideal for businesses with less than 100 employees.
  • Contribution Limits – The maximum contribution you can make to your Simple IRA is $12,500 for 2015 and an additional $3,000 in catch-up contributions if you’re over 50 years old.

Note – Simple IRAs are also easy to determine, and there are no conformity or tests issues to cope with. However, businesses with an increase of than 100 employees aren’t allowed to use these accounts.

Small-MidsizeBusinessCoverages
  1. 401(k) Plans

401(k) plans will vary from IRA accounts in lots of ways. Primarily, qualified employees can pick to make salary-deferral efforts (automated salary reductions) on the pre or post taxes basis. Companies can also make nonelective or matching efforts, or even add profit-sharing features. The wages from the purchases accrue tax-deferred.

  • 401(k) plans are good for businesses that employ more than 25 people, but this varies depending on administration fees.
  • Contribution Limits – The contribution limits for 401(k) plans are $17,500 and $18,000 for 2014 and 2015 respectively, and an additional $5,500 and $6,000 in catch-up contributions if you’re over 50 years old.

Note – Administration fees for 401(k) programs can maintain the number of thousands of dollars, but individuals may take loans against their efforts, making them very attractive as an investment option.

  1. Cash Balance Plans

Although cash balance pension plans are defined-benefit plans, these are maintained based on a personal account, just like defined-contribution plans. Companies credit a set percentage of the participant’s twelve-monthly settlement to the accounts, along with interest charges.

  • Cash balance plans are ideal for professional services firms, or businesses whose employees have a high discretionary income.
  • Contribution Limits – The contribution limits are defined by the plan opted for and market rates.

Note – In cash balance plans, the employee’s account is acknowledged with a pay credit every year, and yet another interest credit. Normally, this is a set or adjustable rate that is associated with a specific index. Market rates do not define the payout – rather, it depends upon the benefits described by the program. Additionally, administration fees could be very high.

  1. Profit-Sharing Plans

Instead of a set or index-linked benefits plan, employers can also provide a profit-sharing plan, gives the participating employees a set share in the gains earned by the business. These are also called DPSP or deferred income sharing programs. Many employers favor these for the increased employee-involvement in the business’ growth

  • Profit- sharing plans are ideal for most businesses with employees which are generating profits.
  • Contribution Limits – 25 percent of total compensation or $49,000, whichever is less for 2010 and 2011.

Note – Profit-sharing plans are limited to employer contributions, which are completely discretionary. The IRS form 5500 needs to be filled annually. These plans can also be offered alongside other retirement plans for employees of the company.

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