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Increased Employee Engagement
When you offer a retirement plan, employees can see the value that you place on their future financial security. This can help boost employee engagement, which is vital for the success of your business. Highly engaged employees are more likely to work harder and be more productive.
You can increase your team’s engagement in many ways, including leveraging modern technology and employee training. In addition, you can make your retirement plan more attractive by offering a competitive match or increasing the contribution limits. You can also host educational events such as lunch-and-learns to teach your employees about investing.
A Simplified Employee Pension (SEP) IRA plan may be ideal for small businesses with a few employees. This plan allows employees to save pre-tax salary deferral contributions of up to 25% of compensation, enabling employers to contribute an equal percentage of their salary. Unlike a traditional IRA, the SEP IRA does not require employers to file IRS Form 5500 or undergo nondiscrimination testing.
Suppose you are interested in implementing a small business retirement plan. In that case, you can connect with a SCORE mentor who can guide you through choosing a provider, filing required documents, and establishing a trust. Once the necessary paperwork is filed, your new retirement plan can be operational within a few months.
Whether you are a solopreneur working alone or have employees, small business retirement plans can help you save for the future. Several accounts are available for small businesses, including traditional and Roth IRAs, SEP IRAs, and SIMPLE IRAs. These retirement savings plans allow you to deduct your annual contributions and receive tax-free retirement distributions.
A retirement plan can help you recruit and retain talented employees. Many experienced job seekers look for perks that provide financial security and benefits like employer-matched retirement savings programs. Offering premium retirement benefits may also help you qualify for startup plan tax incentives and credits.
For some small business owners, however, it may take time to establish a plan for their company. It could be because they need more income to take advantage of the deductions or help to afford the setup and annual fees associated with a 401(k). In these cases, a self-directed IRA can be an effective alternative, allowing you to invest in a wide range of assets beyond stocks, mutual funds, and traditional assets.
As a small business owner, having access to education and guidance on retirement savings is essential, even if you do not have employees. Contact Choice Wealth today to learn more about the options available for you and your business.
Most people saving for retirement do so through employer-sponsored plans offered by their workplaces. However, a study by Capital Group shows that small businesses may be less likely to provide plans than larger firms because of cost and administrative burdens.
If you’re a small business owner, there are ways to save for retirement on a tax-deferred basis that can benefit you and your employees. For example, you can use a self-employed retirement plan like a SEP IRA or a SIMPLE IRA to deduct your contributions and those of your employees. This allows you to reduce your taxes and gives you a leg up on investing in low-cost index funds to help you grow your nest egg.
In addition, you can invest in a solo 401(k), which is similar to a traditional 401(k) but designed for sole proprietors, independent contractors, and small businesses without employees. The account features contribution limits of up to $66,000 in 2023 or 25% of earnings (whichever is lower) and allows you to claim plan startup tax credits of up to $5,000 per year for three years. With no plan administration required, payroll deductions, or compliance testing, the account can be more affordable than a traditional 401(k) while offering the same investment benefits as a 401(k). For details on these options, contact Choice Wealth today.
Small business retirement plans allow employees to reduce their taxable income by contributing through payroll deductions and benefit from tax-deferred growth on investment gains. When the time comes to retire, these contributions can be distributed tax-free, providing a crucial stream of income that can help supplement any pension or Social Security benefits.
Aside from the advantages offered to employees, a retirement plan can also be an essential tool for business owners. It can help them manage the future of their business by reducing the amount they have to pay in taxes when they sell or liquidate their stake, and it can also provide a way for them to diversify their portfolios in the event of a downturn.
There are many different options for small businesses to consider when choosing a retirement plan, such as 401(k)s, SIMPLE IRAs, SEP IRAs, or traditional individual IRAs. Some of these plans require employer contributions, while others allow for higher contribution limits for business owners and may offer tax credits to encourage starting a new project. The right plan for a small business depends on its structure and owner’s goals. A financial professional can help you decide what type of plan is best for your business and walk you through opening a new one.