Running a small business is hard work. For one thing, you’ve got to compete with other large and small businesses in your area. There are only so many eligible employees available for hire, and if you don’t attract them, someone else will.
But finding ways to entice employees and keep them satisfied for years to come can be a difficult task. Luckily, with a great small business retirement plan, it’s easy to maintain a happy work place for many years to come.
Why Start a Small Business Retirement Plan?
If you pay your employees well, respect their wishes, and take extra steps to ensure they are happy at work, you may wonder why it’s necessary to start a retirement plan. The truth is, most people are worried about their financial futures for the following reasons:
- Taxes are changing constantly.
- The threat of inflation and job loss is always looming.
- A natural disaster or tragedy can wipe out a person’s savings in a heartbeat.
Therefore, having a safety net in the form of a retirement plan is one of the best ways to give employees peace of mind.
Having a quality retirement plan feels like a great way to invest in one’s future. This means that there will always be funds available for helping family members, going on vacations, or just enjoying retirement long after the person has stopped working.
What are the Different Types of Small Business Retirement Plans?
The three main types of small business retirement plans are the SEP (Simplified Employer Pension), SIMPLE IRA (Savings Incentive Match Plan for Employees), and the 401k.
What is an SEP Plan?
The Simplified Employer Pension plan is perhaps the most basic of the three retirement plan options available to small businesses. This option enables employers to contribute funds to their employees’ IRA plans each year in whatever amount they wish.
Because of the structure of this plan, it may be appropriate for both single member operations and small businesses with multiple employees.
What is a SIMPLE IRA?
Reserved for businesses with 100 or fewer employees, the SIMPLE IRA allows both employers and employees to contribute to a retirement plan. The plan is fairly easy to set up and maintain, therefore there are fewer restrictions imposed on these plans as compared to a 401k.
While this plan is a good option for smaller companies, it is not a good choice for single member businesses. SEP plans or 401ks are much better options for these individuals.
What is a Small Business 401k?
Lastly, a 401k is a type of retirement plan that can be used by any size business. From freelancers to large enterprises, 401ks provide numerous benefits to employers and employees.
That being said, there are some drawbacks to the 401k plan. One such drawback is that these plans are subject to nondiscrimination testing by the IRS which can be quite arduous.
Whichever plan you choose for your small business, be sure to partner with a great provider who will be there for you when you need them. If you’re ready to start your retirement plan, call a provider today!