Retirement Plans For Small Businesses

Owners of the business are also considered employees and can make employee contributions to their own accounts.IRAs and Solo 401(k)s: If you’re in a competitive field and want to attract the best talent, you might need to offer a retirement plan, such as the two described above.

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As a small business owner, you are completely responsible for your own retirement planning.

If you have employees, you may feel responsible for helping them plan for a successful retirement.

Establish a SIMPLE IRA: The savings incentive match plan for employees, or SIMPLE IRA, is one retirement plan available to small businesses.

In 2018, employees can defer up to $12,500 of their salary, pretax, and those who are 50 or older can defer up to $15,500 by taking advantage of a $3,000 catch-up contribution.

However, employees who participate in other employer-sponsored plans can contribute no more than $18,000 in all employer-sponsored plans combined.

Employers can match employee contributions to a SIMPLE IRA up to 3% of the employee’s compensation.“It is minimized,” said Lebeck, whose HR company is also associated with Decisely and the Society of Collision Repair Specialists on the trade group’s 401(k) project.Employers who lack a retirement benefit and instead opt to direct employees to the Cal Savers program will find “no fees, no fiduciary responsibility, and minimal ongoing responsibilities,” according to the Cal Savers website.Like a SIMPLE plan, a SEP lets small business owners make tax-deductible contributions on behalf of eligible employees, and employees won’t pay taxes on the amounts an employer contributes on their behalf until they take distributions from the plan when they retire. It doesn't matter how few employees you have or whether your business is structured as a sole proprietorship, partnership, corporation or nonprofit.Each year, you can decide how much to contribute on your employees’ behalf, so you aren’t locked in to making a contribution if your business has a bad year.A business owner taking the Cal Savers route basically has to sign up for the program, give employees the chance to join or opt-out, and make sure their contributions go to their IRA “via simple payroll deduction,” according to the Cal Savers website.“The program is required to have minimal administrative requirements for employers and state law protects employers from any liability or fiduciary responsibilities,” the California Employment Development Department’s website states.However, employers are not required to offer retirement benefits to their employees.If you don't, one way you can save for your own retirement without involving your employees is through a Roth or traditional IRA, which anyone with employment income can contribute to.You can also contribute to an IRA on your spouse’s behalf.Roth IRAs let you contribute after-tax dollars and take tax-free distributions in retirement; traditional IRAs let you contribute pretax dollars, but you’ll pay tax on the distributions.