Retirement Plans for Small Business Owners

Published by William T. Fricke at January 30, 2018

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Retirement savings plans are a standard component in benefits packages offered by larger corporations. However, as a small business working with a limited budget, preparing a financial future for yourself or your employees can look like a daunting goal. In fact, a third of small businesses do not have a retirement savings plans because they are “not making enough money.”

Of course, this all boils down to budgeting and the fact that small business owners want to get over the feeling that they do not have the extra money to make retirement savings a priority. When you decide to make retirement savings a priority in your business, the next step is exploring the options available and finding the best way to save. Here are a few retirement savings plans available for small business owners like you.

Personal or Self-Directed IRAs

In a personal or self-directed individual retirement account (IRA), the owner directs all the decisions involving investment on behalf of the retirement plan, and a qualified custodian or trustee holds the IRA assets on behalf of the owner. Individuals who leave a job and want to move their retirement fund from their former employer’s 401(k) plan can roll over the assets into a rollover IRA. Self-directed IRAs are either traditional, which allow annual tax-deductible contributions depending on an individual’s gross income, or Roth, where the account appreciates tax-free as well as withdrawals being free of penalties and tax.

Employer-Sponsored IRAs

These IRAs are ideal for the small business owner who desires to offer his or her employees a retirement plan. There are two options available for you; the Simplified Pension IRA (SEP IRA) and the Savings Incentive Match Plan IRA (SIMPLE IRAs).

SEP IRA allows you to contribute up to a maximum of 25 percent of your employees compensation, or a max of $54,000. As an employer, you fund 100 percent; your employees do not contribute. However, you are not required to contribute yearly, but you need to contribute the same percentage for employees as contributing for owners in a year.

SIMPLE IRA is a solution if you have less than 100 employees and helps you establish an IRA for each participating employee. While the requirements are the same as those in a traditional IRA, your employees have the option of making salary deferral retirement contributions up to 100 percent of the first $12,500 of the compensation they receive.

401(k) Plans

The traditional 401(k) allows your employees to contribute a part of their wages up to $18,000 to their individual accounts. You can make or match these contributions on behalf of participants.  401(k) plans have more complex rules and regulations and higher administrative costs.  They can be an excellent choice for a small business with no employees other than owners.   401(k) plans available include Solo 401(k), Safe Harbor 401(k) and SIMPLE 401(k) plans.

At Fricke & Associates, LLC, we’re here to help you navigate through these issues and much more. Contact us today at 770-216-2226 or through our website at for assistance.

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