As a small business owner, you’re always preparing for the future of your business: you’ve probably got a 1-year plan, a 5-year plan, and more! With all these company plans–as well as the day-to-day craziness that comes with running a small business–it’s easy to lose track of your personal financial planning. However, it’s always a good idea to start retirement planning.
Don’t wait to save for retirement
We asked Candace Sallale of Sallale Financial Strategies, LLC in Plainville, about retirement options for the small business owner. “Saving for retirement is the most important thing a small business owner can do for a better financial future,” she told us, “your financial advisor can work with your team to ensure you’ve got the right plan.”
There are many retirement options out there, but Candace shared the 4 most popular with us:
SEP (Simplified Employee Plan)
This is a great option for a smaller firm, either corporate or noncorporate, looking to minimize filings, paperwork, and overall cost. The max annual contribution is 25% of employee’s net compensation or $52,000, whichever is less. Contribution obligation is discretionary.
SIMPLE IRA (Savings Incentive Match Plan for Employees of Small Employers)
If you’re an employer with 100 or fewer employees (earning $5,000 or more) during the past year, a SIMPLE IRA may be the retirement plan for you. The SIMPLE IRA allows employee elective salary deferral contributions, requires minimal IRS reporting, and has minimal cost.
If you employ more than 25 people, this is a good option. This plan allows employee elective salary deferrals up to $17,500. Elective salary deferrals are optional. Also, as an employer, you can opt to match employee elective deferrals and/or make a discretionary profit sharing contribution.
Profit sharing is a good choice if you’re looking for flexibility of discretionary contributions, and the ability to impose a vesting schedule on these contributions. Your contribution as an employer is limited to 25% of total eligible compensation, and compensation obligation is discretionary.
In conclusion, there are many options for small business owners to begin saving for retirement. Many can have a beneficial effect on your taxes, too! Start today.