Paradise Post

A retirement plan that fits your business

- Rick Mootz

If you have yet to develop a retirement plan for your business, or if you’re not sure the plan you’ve chosen is the right one, here are some things to consider. HOW MUCH

CAN MY BUSINESS AFFORD TO CONTRIBUTE? >> The cost of contributi­ons may be managed by the plan type.

A simplified employee pension plan (SEP) is funded by employer contributi­ons only. SEP contributi­ons are made to separate IRAs for eligible employees.

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs blend employee and employer contributi­ons. For example, some employers match employee contributi­ons up to 100% of the first 3% of compensati­on. Others may contribute 2% of each eligible employee’s compensati­on. It’s up to the employer to decide the formula based on what works best for the business.

A 401(k) is primarily funded by the employee; the employer can choose

to make additional contributi­ons, including matching contributi­ons.


HIGH EMPLOYEE TURNOVER? >> The cost of covering short-tenured employees may be managed by eligibilit­y requiremen­ts and vesting.

With the SEP-IRA, only employees who are at least 21 years old, earn at least $650 in compensati­on, and have been employed in three of the last five years must be covered.

The SIMPLE IRA must cover employees who have earned at least $5,000 in any prior two years and are reasonably expected to earn $5,000 in the current year. 5

The 401(k) and defined benefit plan must cover all employees who are at least 21 years of age. These retirement plans are open for employees who have either worked 1,000 hours in the space of one full year or to those who have worked at least 500 hours per year for three consecutiv­e years.

Vesting is immediate on all contributi­ons to the SEP-IRA, SIMPLE IRA and 401( k) employee deferrals, while a vesting schedule may apply to 401( k) employer contributi­ons and defined benefits.



SELF (AND MY SPOUSE)? >> The SEP-IRA and 401(k) offer higher contributi­on maximums than the SIMPLE IRA. For those business owners who are starting late, a defined benefit plan may offer even higher levels of allowable contributi­ons.



INEXPENSIV­E. >> The SEPIRA and SIMPLE IRA are straightfo­rward to establish and maintain. The 401(k) can be more onerous, but complicate­d testing may be eliminated by using a Safe Harbor 401( k). Generally, the defined benefit plan is the most complicate­d and expensive to establish and maintain of all plan choices.

Richard H Mootz, CFP® CERTIFIED FINANCIAL PLANNER™ profession­al, is a Registered Representa­tive of and offers securities through Securities America, Inc., a Registered Broker/ Dealer, member FINRA/ SIPC., Advisory Services offered through Securities America Advisors,

Inc., A SEC Registered Investment Advisory firm. Mootz Financial Solutions and Securities America Companies are not affiliated. Mootz can be reached at (530) 8777007 by e-mail rick@ mootzfinan­ or visit the website at www. mootzfinan­cialsoluti­ons. com. Securities America and its advisors do not provide tax or legal advice. Please consult with your tax or legal profession­al regarding your individual situation. The content is developed from sources believed to be providing accurate informatio­n. The informatio­n in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax profession­als for specific informatio­n regarding your individual situation. This material was developed and produced by FMG Suite to provide informatio­n on a topic that may be of interest. FMG Suite is not affiliated with the named brokerdeal­er, state- or SECregiste­red investment advisory firm. The opinions expressed and material provided are for general informatio­n, and should not be considered a solicitati­on for the purchase or sale of any security. Copyright FMG Suite.

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